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#68 Using a reverse mortgage to help fund grandkids’ education


David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

January 24th, 2022

You never thought this would happen, but in your late sixties, the two of you are being given a second chance to practice your parenting skills. Your daughter, a widow, is a traveling healthcare “auditor” and is out of town a good portion of the time. In order to help supervise the two teen children, you decided last year to let all three of them move in with you. As retired educators, the two of you are well-positioned to supervise the grandkid’s studies (including remote learning when necessary), and to chauffeur them to their various activities (neither is yet of driving age). Your daughter has the peace of mind of knowing her kids are well taken care of during her absences.

Fortunately, five years ago you did an extensive remodel of your home, creating a ground floor master bedroom and bath, but still maintaining three upstairs rooms. Your plan was to “age in place”; now you’re “parenting in place”! From a financial standpoint, nothing has really  changed for you, as your daughter is well able to support her own expenses and those of the children; in fact, she has insisted on contributing to the monthly household expenses.

Within the next five to six years, both of the grandchildren will be entering college, and you would like to find a way to help fund those costs. You had used a home equity line of credit to fund the big remodel, and have that loan almost two thirds repaid. Since mandatory withdrawals from your retirement plans will need to start just about when the older grandchild is going to need tuition help, you’re hoping to be able to at least make a dent in the college costs.

As an alternate approach to your situation, consider using your own housing wealth to help with the grandchildren’s education costs. Since your plan always was to remain in your home, a reverse mortgage line of credit can provide the source of funds to help pay college expenses for the grandchildren precisely when most needed. Since reverse mortgage payments are considered loan proceeds rather than income, they are not taxable. You can choose to make each withdrawal precisely when each grandchild is faced with a specific and immediate college expense.

Your housing wealth can help you help those grandkids!