How does a reverse mortgage affect the equity 5 to 10 years down the road?

A fellow caregiver asked...

My mother is 84 yrs old.  Fifteen years ago she changed her deed into my name and my six sisters names and added a life estate.  The home is in much need of repair and updating. My mother, myself and 3 of my sisters want to take out a reverse mortgage. however, three of them want nothing to do with it.  The house was appraised for $455k we are looking to borrow against a reverse mortgage line of credit about $175k. How will this effect the equity in the house say, 5-10 years down the road?

Expert Answer

Barbara Steinberg is the CEO and founder of BLS Eldercare Financial Solutions, which specializes in helping families pay for long-term care for their loved ones. A registered financial gerontologist, she speaks regularly on the topic of paying for long-term care and is a financial expert for Caring.com.

To take out a reverse mortgage, all of the owners must agree to it. With the deed as it stands now, all 7 siblings and your mother would have to give permission. Plus, all borrowers need to be at least 62 to qualify for an FHA -insured HECM (Home Equity Conversion Mortgage). I doubt that all of your siblings would qualify.

In order to obtain the maximum reverse mortgage, you should think about changing the deed back to your mother's name only.

The amount that can be borrowed, or made available as a line of credit, is determined by the value of the house, the location of the house, and the age of the youngest borrower. Based on the value of your mother's house and her age alone, she should be be able to access a fair amount of money from a typical reverse mortgage --- if she is the only homeonwer. You and your siblings could then inherit the house either through a will or trust after her death.

The equity that is available to pay off the mortgage will depend on how much has been borrowed. If you contact a reverse mortgage specialist, he or she can create specific models to give you an idea of how the equity in your mother's home will be affected.