Home equity or reverse mortgage
Hi Terry,
My mother is 98 and in fairly good health except for some hearing loss and dementia. She lives in her own home with caregivers who are with her from about 9-7 each day. As her only child and her only family, I am becoming concerned that her savings may not last and am considering my options. I would like to know your opinion on whether a home equity or reverse mortgage may be a good option to help pay for her care. She owns her home and it is worth about $350,000.
Thank you,
Terry Says
Well, first of all she can’t get a traditional home equity loan because she is not employed.
And at this age it doesn’t make sense to pay the fees for a reverse mortgage.
And you don’t want to sell the house — not only because she is comfortable there, but because at death her heirs will receive it at a new stepped-up value as of date of death, so no capital gains taxes.
I’m assuming she has a will and an estate plan. The easiest thing is for you — or you and your siblings –to ante up for her care till the end of her life. With a written agreement that you will be repaid FIRST out of the proceeds of her house. There is no cost to that, and I’m assuming you have some savings that could be used for this purpose. At age 98, though we wish her a long life, this will not be a long-term loan. Check with your estate planning attorney to document this agreement, and maybe even add a small interest payment to be fair.
