Taking Care of Mom and Dad: Right of Rescission

Your parents have three business days after signing papers in which to cancel the loan ("three-day right of rescission"). After the rescission period elapses, the loan is paid to your parents in the form of the payment option selected (i.e., monthly checks, etc.).

Any existing debt on your parents' home is paid off. A new lien is placed on the home. Your parents may use the loan proceeds for any purpose. During the life of the loan, the lender sends monthly payments to your parents (if this option is chosen), advances line of credit funds to your parents upon request, collects any repayments by your parents on the line of credit and sends your parents periodic statements.

Some people use at least part of the proceeds of a reverse mortgage to buy some form of annuity. In many cases, this is a smart idea. If your parents purchase an annuity as part of the transaction, the annuity will usually provide continued monthly income -- even after they sell or move out of their home.