As parents age, their children often become increasingly involved in their financial decisions. One area that frequently generates discussion is the use of a reverse mortgage to access the equity in their home. While well-intentioned, the advice that children offer to their parents about reverse mortgages can sometimes be misguided. In this article, we will explore why your children’s advice about reverse mortgages might not always be the best source of guidance.

First, it’s important to understand what a reverse mortgage is and how it works. A reverse mortgage is a loan that allows homeowners aged 62 and older to access the equity in their home while continuing to live in it. Unlike a traditional mortgage, a reverse mortgage doesn’t require monthly payments. The loan balance accrues over time, and the homeowner typically repays it upon death, sale, or permanent move-out. Several factors, including the homeowner’s age, the home’s value, and the interest rate, determine the amount that the lender allows the homeowner to borrow.

One common misconception about reverse mortgages is that they are only for people who are struggling financially. However, this is not necessarily the case. While some people use reverse mortgages to supplement their income, others use them as a financial planning tool to help them achieve their retirement goals. For example, a homeowner might use a reverse mortgage to pay off an existing mortgage, reduce monthly expenses, or access cash for unexpected expenses.

So why might your children’s advice about reverse mortgages be misguided? Here are a few potential reasons:

1. They don’t fully understand how reverse mortgages work.

Many people, including adult children, are not familiar with the details of reverse mortgages. As a result, they may offer advice based on incomplete or inaccurate information. Some assume that a reverse mortgage is a last resort for struggling individuals or that it leaves the homeowner with no equity. In reality, many homeowners use reverse mortgages as a viable financial planning tool, while still retaining ownership of their home.

2. They are influenced by negative media coverage.

Reverse mortgages have received a fair amount of negative media coverage over the years. Stories of unscrupulous lenders taking advantage of seniors or homeowners losing their homes because of unpaid property taxes have raised concerns about the safety of reverse mortgages. It’s important to be cautious when considering any financial product, but it’s also important to note that not all reverse mortgages are equal. Homeowners can reduce risks by working with a reputable lender and carefully reviewing the loan terms.

3. They have their own financial goals in mind.

Adult children who offer advice about reverse mortgages may have their own financial goals in mind. For example, they may want to inherit the family home or be concerned about their own inheritance. While these concerns are understandable, they may not align with the homeowner’s goals. It’s important for homeowners to make decisions that are in their own best interest, not just their children’s.

4. They don’t fully understand the homeowner’s financial situation.

Finally, children may not fully understand their parent’s financial situation, including their income, expenses, and assets. Without this information, it’s difficult to make informed decisions about whether a reverse mortgage is a good option. Homeowners can educate their children about their financial situation and involve them in the decision-making process if they feel comfortable.