Most Children Who Inherit Their Parents Homes Plan to Sell: Report 

It’s not uncommon for parents to leave their homes to their children either as a way to pass on their wealth or in hopes that they will keep the home in the family, but in most cases, the children who inherit their parents homes just put them up for sale, according to a recent report by The Wall Street Journal.  

While it’s typically a difficult decision, it just doesn’t make financial sense for most adult children to keep the home. It’s simply too expensive right now to pay for the much-needed home upgrades, property taxes, and other costs to keep the place running combined with increasing electric and gas bills, The Wall Street Journal explained.  

And for those who do want to keep the home and propose buying out their siblings, the current market value of the home combined with high interest rates make the transaction unrealistic for most. 

With housing prices being at an all-time high, selling ends up being an easy decision.  

What Other Options Do Homeowners Have? 

The National Retirement Risk Index found that almost 50 percent of households are either in bad shape or not worried enough about retirement, according to the Center for Retirement Research at Boston College (CRRBC). 

If a household is not prepared for retirement, it means that their current savings rate is not substantial enough to allow them to maintain their current standard of living in retirement.  

If you find that you haven’t saved enough for retirement, you may be able to use your home as a retirement tool by taking out what is called a home equity conversion mortgage (HECM), more commonly known as a reverse mortgage. A reverse mortgage is only available to homeowners who are 62 years of age or older. 

A reverse mortgage was once considered a last resort option, but retirement experts now view it as a valuable “retirement income tool.” 

Retirement expert Dr. Wade Pfau says that “financial planning research has shown that coordinated use of a reverse mortgage starting earlier in retirement outperforms waiting to open a reverse mortgage as a last resort option once all else has failed.” 

One of the biggest financial concerns in retirement is cash flow. A reverse mortgage can help homeowners who are facing a cash-flow deficit in retirement. 

Pfau says that a reverse mortgage “allows homeowners to borrow against the value of their home, creating liquidity from an otherwise illiquid asset.” 

A reverse mortgage increases cash flow in two ways.  

First, if the homeowners still have a mortgage on their home, the reverse mortgage will pay off the current mortgage and free up the money going toward the monthly mortgage payment.  

Second, for the remaining equity, homeowners will have the option to receive the money as a lump sum, a line of credit, monthly payments, or a combination of those options.  

The money from a reverse mortgage can be used however a homeowner sees fit. That means that if the home needs some upgrades, some of the money can go toward that. If it’s monthly bills that need some help, then some of the money can help to offset those costs. If homeowners simply want more money tucked away in the event of an emergency or unplanned expenses, the money can be put into a line of credit to be used as needed.  

There are a lot of options.  

The home still belongs to the homeowners, which means they are still able to leave it to their children, but if the children are planning to sell it after their parents pass away, at least the parents can use it for their benefit in the meantime to ensure they have a fully funded retirement. 

If a reverse mortgage sounds like an appealing option, the best way to get started is to talk to one of our featured reverse mortgage lenders. 

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement.