“Sisters, sisters, there were never such devoted sisters,” Bette Midler and Linda Ronstadt sang back in 2003, and the two of you embody the close-knit relationship depicted in that song….
When the second of your parents died, bequeathing the family home to the two of you sisters, for years you chose to use it as a rental property. Over the ensuing years, whenever one of you has faced health issues, the other has stepped up to help with meal preparation and errands, plus driving to doctor appointments. Finally, six years ago, you came to the decision to move into the property yourselves. Using a home equity line of credit (which is now almost paid off), you had some extensive remodeling done to accommodate your interests and somewhat diminished abilities. Widows both, with adult children living in other states, you have chosen to care for each other rather than moving to a retirement community or assisted living facility.
Paying household expenses has been done through a jointly held bank account, with each of you depositing a fixed amount of dollars into that account from your respective Social Security and pension money. In the process of reviewing your estate plans and health insurance coverage, it was suggested (at a seminar offered at your church) that you might consider a reverse mortgage on the home as a “buffer” against future needs.
Sharing a reverse mortgage can make a lot of sense for senior siblings sharing a home, offering each of you “housing security” should something happen that makes it difficult for the other to continue to shoulder half the financial burden. (When two people are approved to share a reverse mortgage, the mortgage remains in place until the permanent departure of the second borrower.)
With a HECM (Home Equity Line of Credit) reverse mortgage set up as a line of credit, you will have no obligation to make monthly mortgage payments,* and will be able to “draw” on that line of credit as needed to cover expenses. Meanwhile, the unused portion of the equity will be credited with growth at the same rate as the interest being charged on the borrowed funds.
Since both of you will need to be approved as borrowers, as part of your estate planning, it will be important to give financial power of attorney to each other.
“Sisterhood is like a string that tethers you to each other for life,” Ella Kelly wrote in “The Beauty of Sisterhood”.
*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org
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