Mom is probably soon going to Memory care. We have a LTC policy that covers a chunk and VET money as well but there is still extra cost. We would prefer not to sell her condo but instead, we would like to renovate it a bit to get it ready for rental. I have durable POA. Can you take a HELOC as POA? Has anyone been in this situation? How did you handle it? Does the condo have to be in your name? Im also on a Warranty deed for the condo. I called our bank, they said I should talk to our lawyer. Our lawyer said I should talk to the bank. Thanks in Advance.
I think why your getting pass the potato from the bank is that they don’t want someone to file an Equal Credit Opportunity complaint for ageism when grannie gets turned down. They would rather not ever have to even accept an application in the first place.
To me, the best situation is to do - if it’s that mom just insists on keeping her place - is for you & your family to make the condo as freshy fresh as possible (paint, new carpet, get rid of anything that screams old lady’s condo), do the labor for free & mom pays for materials. Then rent it at a slightly lower market rent as it’s not comparable to a brand new, renovated place. Please be sure - if there is a HOA - rentals allowed and with whatever restrictions done. Like 1 year minimum rental with parking restrictions & no use of pool or gym or clubhouse if it’s a Condo HOA who really frowns on renters completely.
& please please read & reread the fine print on her LTC policy as to conditions needed to do a pay out. There will be a waiting period of private pay - tends to be 120 days - and some policies are quite specific as to the type of “care” that must be provided. That a certain # of health conditions must be met AND done by a certain type of health care professional. Like the policy means actually done by a Registered Nurse. Often AL & MC do not have the actual hands-on done by a RN but done by aides, CNAs, etc. So policy will not pay AL & MC but only will do it if it’s in an actual skilled nursing facility aka a SNF\NH and the facility documents their staffing info (credentials and bedside logs) to the LTC insurer.
I don’t know how common this is, but my moms 2nd & eons better NH did not accept LTC insurance for payment. Signage at the entry and in the elevators on this. It was private pay or LTC Medicaid. I asked why and got an earful from billing as to the issues when they did take LTC insurance….. the big issue was that some policies wanted info who the caregiver was, their education and scheduling which was too time consuming (plus privacy concerns) & also payments tended to run late due to this as something would need “clarification”. That it was flat better to have a Medicaid bed even at lower than private pay rate as Medicaid paid like clockwork and LTC insurance had too many glitches.
Next, deal with the fact that if she is moving to memory care, the lender won’t consider it an owner occupied property. Rental properties can get loans, but the rates are usually higher.
Note that HELOCs are often a second mortgage, with a preexisting mortgage already in place. If this is your situation, the existing mortgage probably has a lower rate than currently available. The existing lender will likely not make an issue of a long time owner occupied home becoming a rental. However, a new lender may be more reluctant to take second place behind the existing lender, so you may be looking at a cash out refinance with a higher rate for all the debt.
You will need a lender willing to deal with the POA. They will look at the amount of equity in the home and will evaluate your business plan including rent and vacancy projections as well as expected expenses and what your planned reserves are. If you have any education or experience in property management that could help, or maybe you will hire a property manager to handle tenants and repairs.
Another thought: does the condo HOA place limitations on rentals?
At least it sounds like you aren’t trying to make this work with Medicaid.
Inn, I think I would not seek permission from the bank. Apply for the HELOC and attach your POA. Big they say "no" get your lawyer involved.
A POA can allow you to do almost ANYTHING that the POA document says you can do. My own POA
was done by my brother and I with his attorney and at my brother's request. It was extremely complete, point by point about every single power I had with regard to his properties as Trustee of anything in trust and as POA for all other property.
At the end of the session, in fact, the attorney teased my brother, asking him if he was certain about signing this as "Your sister can now sell the gold out of your teeth".
The attorney you see should read your document and show you exactly what numeral spells out your right to ask for and pay loans on your parents' property.
If there is none, or if it is vaguely written legally, then a bank is very unlikely to make such a loan. Banks don't like problems they can forsee. They like clean deals they can predict. So even with the POWER there is no assurance of the loan.
I wish you the best of luck.