{"id":128956,"date":"2025-09-09T00:40:11","date_gmt":"2025-09-09T00:40:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/128956\/"},"modified":"2025-09-09T00:40:11","modified_gmt":"2025-09-09T00:40:11","slug":"my-parents-have-a-lot-of-debt-but-they-also-have-a-mortgage-ive-got-a-reverse-mortgage-plan-for-them","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/128956\/","title":{"rendered":"My parents have a lot of debt, but they also have a mortgage. I’ve got a reverse-mortgage plan for them."},"content":{"rendered":"

Pay Dirt is Slate\u2019s money advice column. Have a question? Send it to Kristin and Ilyce here<\/a>. (It\u2019s anonymous!)<\/p>\n

Dear Pay Dirt,<\/p>\n

Can you elaborate on reverse mortgages and whether they\u2019re a good idea? My in-laws are in their 80s and on limited social security. My mother-in-law loves to spend, spend, spend and has always been that way. My father-in-law is tight with his money, but has mild-to-moderate Alzheimer\u2019s, and my wife and her two sisters are concerned mom might get a hold of dad\u2019s bank account and drain it. They have a house worth maybe $700,000, and they owe about $70,000 still on it due to poor financial decisions in the past.<\/p>\n

We\u2019ve researched reverse mortgages, but the info is confusing. Given their limited income, would they be able to get one, and if so, does that mean the mortgage company gets added to the deed so that they get their money back when the house is sold after both parents have passed? Seems almost too simple, as that option would really help them both, in terms of debts and also medical care for the dad as his condition worsens. My wife and her sisters aren\u2019t concerned about inheriting the house or anything, it\u2019s all the issues around elder care that are now being dealt with that are top of mind.<\/p>\n

Any advice is appreciated.<\/p>\n

\u2014Cash Poor, House?<\/p>\n

Dear Cash Poor, House,<\/p>\n

A Home Equity Conversion Mortgage (HECM)<\/a> is the most popular form of a reverse mortgage. Insured by the Federal Housing Administration (FHA), it allows cash-strapped seniors over the age of 62 to convert a portion of their home equity into cash, equal payments stretched out over a period of years, or a home equity line of credit, to use when the need arises.<\/p>\n

There are plusses and minuses to taking out a reverse mortgage. On the plus side, your inlaws can pay off their debt, keep ownership of the property and never have to make a loan payment. They can stay in the property until the last of the owners dies, sells the home or no longer lives there full-time. At that point, the reverse mortgage becomes due, along with the accrued interest and fees. But, even if the reverse mortgage is higher than the sales price of the property, they or their estate typically won\u2019t owe more than the property is worth. FHA insures the loan and makes up any shortfall if the home sells for less than the loan balance.<\/p>\n

On the other hand, even if the conventional mortgage is paid off, owners still have to remember to pay their property taxes and insurance premiums, as well as any home maintenance. Your inlaws shouldn\u2019t expect to leave much, if anything, to your heirs. Depending on how long they live, any remaining equity will likely be eaten up by the interest rate, which will be higher than a conventional mortgage. The fees are higher, too. They likely won\u2019t get to tap the full amount of their home equity, however. The formula is based on age, the age of the spouse (if there is one), current interest rates and the amount of equity available.<\/p>\n

Now that we\u2019ve gone through that, the question is should your inlaws get a reverse mortgage? It sounds as though it might help them get over the hump by eliminating their current debt. They could take a little extra money to help make any necessary repairs or upgrades to the property to help them age in place. While they\u2019ll still own the house, they won\u2019t get all of their money back. That\u2019s not how this works. They might die with just 10 percent of the equity remaining in the property, or $70,000. If they live long enough, they might owe more than the house is worth when your last parent dies.<\/p>\n

Also, if they\u2019re not careful, you might find your mother-in-law has blown all of this equity and they\u2019re now back where they started, except this time they won\u2019t have the equity to fall back on.<\/p>\n

There are other options to consider. Companies like Unlock.com<\/a> and Hometap.com<\/a> allow you to access your equity without making monthly payments. They will take an equity stake in the property of up to 25 percent, which will need to be paid off or refinanced within 10 years. With $630,000 in equity, your inlaws might be able to get around $150,000, but still control the property and the remaining equity.<\/p>\n

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If your wife\u2019s parents have enough income to qualify, they might be able to get a home equity line of credit, which would also pay off their remaining loan and free up some cash. Could your or her siblings purchase their home and give them an income stream of some sort to supplement their cash?<\/p>\n

Finally, please focus on the real problem at hand: Your mother-in-law\u2019s spending. However your inlaws tap their equity, the cash will quickly disappear if you don\u2019t cut off her access to their credit cards and bank accounts. Since your father-in-law has Alzheimer\u2019s, he may not be legally able to sign a power of attorney. Please talk with an estate attorney immediately to look at what options are available to you.<\/p>\n

To explore whether a reverse mortgage is a good choice, talk with a certified HECM counselor. You can find one by contacting a Department of Housing and Urban Development (HUD) housing counseling agency<\/a>, by using the HUD Intermediaries Providing HECM Counseling Nationwide list<\/a>, or by calling (800) 569-4287.<\/p>\n

\u2014Ilyce<\/p>\n

More Money Advice From Slate<\/p>\n

I have made a terrible mistake and I don\u2019t know what to do about it. I just bought a house that\u2019s now falling down around me. I got a conventional loan with 20 percent down. The seller did not report any major structural issues during closing, but I have discovered that the house is splitting in two. It started out as a single-wide mobile home but it has so many additions that it looks like a brick-and-mortar home. There\u2019s an inch-wide crack in the floor, and the roof is buckling in the same spot. The subflooring needs to be replaced. The doors don\u2019t latch, and the floors aren\u2019t level. The heat pump just died, too.<\/a><\/p>\n

The latest sex, parenting, and money advice from our columnists delivered to your inbox three times a week.\n <\/p>\n","protected":false},"excerpt":{"rendered":"Pay Dirt is Slate\u2019s money advice column. Have a question? Send it to Kristin and Ilyce here. (It\u2019s…\n","protected":false},"author":2,"featured_media":128957,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[8786,64,63,99,2582,186,184,185,1003,13190],"class_list":{"0":"post-128956","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-advice","9":"tag-au","10":"tag-australia","11":"tag-business","12":"tag-family","13":"tag-finance","14":"tag-personal-finance","15":"tag-personalfinance","16":"tag-real-estate","17":"tag-slate-plus"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/128956","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=128956"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/128956\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/128957"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=128956"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=128956"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=128956"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}