Expert: Yan Ross - 10/19/2009

Question
QUESTION: If my reverse mortgage has a credit line and I still have $100k credit still available and I need to go into assisted living, should I go ahead and draw that $100k out before I am forced to sell my home in the coming 12 month period?

ANSWER: Hello, Ross.

You pose an interesting question, but one that requires additional information for me to respond in a meaningful way.

Here are some of the facts and issues you will need to address:

What is the current value of your home?

How much do you have outstanding on the reverse mortgage?

How much equity do you have left?

How soon do you plan to go into assisted living?  What will that cost?

Would there be equity left in the home after drawing out the last $100,000 available on the reverse mortgage credit line?

What are your other financial resources?

What consideration do you plan to make for your heirs -- do they have any interest in owning the home in the future?

If drawing down the rest of the available $100,000 would exhaust the equity in your home, and you just plan to walk away from the house when you leave for assisted living, it might make sense to do so -- from a purely financial standpoint.

I would suggest that you consult with a financial professional with experience in the seniors/elders area before making such an important decision.

If you wish, you can come back to me with additional information, but ultimately your decision should be made with direct professional input.

I hope that helps.

Good luck!





---------- FOLLOW-UP ----------

QUESTION: The reason being...I would have the money for the assisted living payments and whatever the house sells for, the insurance would make up the difference to pay off the loan if necessary.

Answer
Yes, I understand that you would not be liable for any shortfall on the sale, assuming it's a HECM (FHA-insured) reverse mortgage.

From a purely financial perspective, if the house is not worth more than the full amount of the credit line, plus accrued interest, and you are moving soon, it may well be viable to draw down the balance available.

But I would still suggest that you seek professional advice to take into account the other issues I mentioned.

Hope that helps.