Over the weekend the Wall Street Journal published the Case for Being Your Mom’s Banker where they discuss whether a reverse mortgage or a private mortgage between family is a better decision to help out your parents.
In respect to reverse mortgages, WSJ contributor Kelly Green writes:
But there are significant drawbacks. The fees can run as much as 7% of the home’s value, compared to roughly 3% for a conventional loan. Lenders typically won’t allow homeowners to borrow against all of their equity. And in the end, the lender gets the home, an asset many parents would prefer to leave to their children.
Clearly the lender doesn’t “get” the home, but the article focuses more on setting up a private reverse mortgage where the family avoids paying lender fees and may even get a few tax breaks says the WSJ.