How Can a Reverse Mortgage Help My Family or Heirs?

A reverse mortgage can help your family or heirs indirectly by easing your financial burdens during your lifetime, potentially preserving other assets (like savings) for them, or by funding the purchase of a new home, that bring you closer together—all without monthly payments. However, it’s not primarily designed to benefit them directly, as it reduces your home equity, which is often a key inheritance. The impact depends on how you use it and what you prioritize: your comfort now or their legacy later.

How It Helps Family/Heirs

• • Preserves Savings: Using home equity for expenses (care, debt, repairs) instead of draining your retirement accounts leaves more cash or investments for heirs.
  • Reduces Your Dependence: Covering costs like healthcare or home mods means you’re less likely to lean on family for financial help, keeping their wallets intact.
  • Relocation: An HECM for Purchase can fund a move closer to them, strengthening bonds without monthly mortgage strain—more time together, less travel cost.
  • Debt Relief: Paying off debts now prevents heirs from inheriting them or dealing with a messy estate.

How It Works

• • Standard Reverse Mortgage: Tap equity in your current home for cash—lump sum, monthly payments, or credit line—to ease your finances.
  • HECM for Purchase: Sell your home, buy a new one near family with a reverse mortgage covering part of the cost, possibly pocketing sale proceeds.
  • Repayment: The loan’s due when you sell, move out permanently, or pass away—paid via the home’s sale. Heirs can keep the home by paying off the loan, but equity left shrinks as the loan grows.

Benefits vs. Trade-Offs

• • Upside for Heirs: More net proceeds from a sale or keep savings intact, they inherit that instead of just a house. Emotional perks—like proximity—also count.
  • Downside: The loan plus interest eats away at home equity. If the home’s their big inheritance, they get less proceeds.

Quick Examples

• • Savings Boost: You’ve got a $400,000 home and $100,000 savings. A $150,000 reverse mortgage covers healthcare, leaving $100,000 for heirs instead of $0.
  • Move Near Kids: Sell a $350,000 home, buy a $380,000 home near family with $170,000 from the sale and $210,000 reverse mortgage, this provides $80,000 in extra cash savings.

Reverse mortgages can be a useful financial tool for eligible seniors looking to supplement income, pay for healthcare, or cover living expenses, but they also come with complexities that should be thoroughly understood before proceeding.

Learn more about eligibility requirements for a reverse mortgage, situations where a reverse mortgage is best used, and common myths around reverse mortgage that we debunk with facts