Mrs. H, in Southern California just signed her loan documents on a reverse mortgage. At over 80 years old she qualified for an amount sufficient to pay off her current loan and establish a line of credit for over $300,000.00. With the advice of her financial planner, and the blessing of her children, she left the money in a line of credit where it will grow. Her goal is to use the funds to pay for in home health care at such time as she may need it. Since she hasn't "borrowed" the available funds in the line of credit, her equity in the home is far greater than if she had taken all the funds in a lump sum.
Based upon HER needs I think this was a great option! Another person may have been better served by selling the home and moving into an apartment or condo and investing the proceeds into something safe. But she did not want to leave the home and would have had to pay a capital gains tax which would have been considerable as the home was appraised at almost 2 million dollars and she bought it for less than $70K over 40 years ago! The tax hit on that would have been far greater than the cost of the reverse mortgage. More importantly, it would have broken her heart to ever leave her home.
What do you think?
Deborah Nance, Reverse Mortgage Professional for Corona, the Inland Empire and Southern Californa.
