Reverse mortgage for a parent: a guide for adult childrenMom or Dad is looking at a reverse mortgage. Here’s what you need to know.
What happens to the house and the inheritance, who is protected and who isn’t, the questions to ask, and the warning signs to watch for. Written by a California broker who would rather have the family in the room than not.
The short version: a reverse mortgage lets a homeowner 62 or older (55 or older on some proprietary programs) borrow against the home with no required monthly mortgage payment while they live there and keep up with property taxes, insurance and maintenance. The balance grows over time and is repaid when the last borrower leaves the home, usually by selling it. It can be the right tool for a parent who wants to stay home, and the wrong one for a parent who may move soon or whose plan depends on someone else living in the house.
Six questions to work through as a family
- Who will live in the house over the next ten years, and what happens to anyone who isn’t on the loan?
- What does the monthly budget look like after taxes, insurance and upkeep, and is there a set-aside to pay them?
- Is the goal a monthly income, a standby line of credit, retiring a mortgage payment, or buying a smaller home?
- What are the total costs, line by line, and what does doing nothing look like as an alternative?
- Does a HECM or a proprietary jumbo fit the home, and why?
- What does the family want to happen to the house, and has the estate plan been updated to match?
Bring these to the first call. I’ll answer them in writing, including when the answer is that your parent shouldn’t do this.
What adult children ask most
Does a reverse mortgage mean we lose the inheritance?
Not automatically. The house stays in your parent’s name and passes to the heirs as it would with any mortgage. What changes is how much equity is left: the loan balance grows over time. Heirs can sell and keep whatever remains, or keep the house by paying off the loan or refinancing. The loan is non-recourse, so no heir ever owes more than the home is worth, and on a HECM the family can settle for 95% of the appraised value if the balance is higher.
How long do we have after a parent passes away?
The servicer contacts the estate once the last borrower has died. The family then has 30 days to say what it plans to do and up to six months to sell or refinance, and the servicer can grant up to two 90-day extensions when a sale is under way. Call the servicer early; silence is what causes problems.
My brother lives in the house with Mom. Is he protected?
No. A HECM protects an eligible non-borrowing spouse, not other relatives. When the last borrower leaves the home, the loan becomes due, and anyone else living there needs a plan: buying the house, refinancing it, or moving. This is the conversation most families skip, and the one most worth having before anyone signs.
Will it affect Medi-Cal, SSI or other benefits?
Loan proceeds are not income, so they don’t reduce Social Security or Medicare. Needs-based programs such as SSI and Medi-Cal look at money held in the bank, and cash drawn and kept past the month it arrives can count. The usual answer is to draw only what will be spent. If a parent is on, or may need, a needs-based program, involve an elder law attorney before closing.
Can I attend the meetings, or talk to you for my parent?
Yes, with your parent’s permission, and I encourage it. I’ll talk with you about your parent’s file once they say so, in writing. Counseling with an independent HUD-approved counselor is required before any reverse mortgage, and family members are welcome to join.
What if Dad can no longer make his own financial decisions?
Then stop and talk to an elder law attorney first. A reverse mortgage requires the borrower to understand the loan, and the rules for signing under a power of attorney or conservatorship are specific. I won’t proceed on a file where the borrower’s understanding is in doubt.
Warning signs worth stepping in for
- Anyone who pushes your parent to use the money to buy an annuity, insurance or an investment. California law bars a lender from requiring an annuity purchase as a condition of the loan.
- Pressure to sign quickly. California requires counseling first and then a seven-day wait before the loan application can be finalized.
- Claims that a parent “can’t lose the home.” Property taxes, insurance and upkeep still have to be paid, and missing them can make the loan due.
- A lender or contractor who found your parent, rather than the other way around, especially for home repairs paid from the loan.
- Anyone who discourages you from being involved or from reading the documents.
Concerned about elder financial abuse? Adult Protective Services takes reports in every California county, and your parent’s bank or an elder law attorney can help you act quickly.
Where to go next
See what your parent’s home could support with the reverse mortgage calculator, read what a reverse mortgage costs, compare it with a bank line in HECM vs. HELOC, or look up any term in the glossary. The free California guide covers all of it in one download you can share with siblings.
Written by Kenneth M. Adler
Every page on this site is written and maintained by me: the same person who answers the phone, runs your numbers, and handles your file start to finish. No call center, no hand-offs, no lead-selling. More about how I work →
Call with your parent, or for them
With your parent’s permission, I’m glad to talk with you directly, and to walk the whole family through the numbers on one call.
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