Two come to mind. If your parents have reached the age of 65 and they owned and occupied their house for at least five years and they have resided in Massachusetts for at least 10 years and have a gross income not exceeding $49,000 they can apply to the city to have their taxes deferred. What that means is that they don't pay their real estate taxes. The amount of the real estate taxes becomes a lien on their property but the city will not look to enforce the collection of taxes. Interest will accrue on the taxes that are unpaid at the rate of 4% per year (recently down from 8% per year ), which is a bargain compared to the 14% per year which accrues on unpaid real estate taxes in the usual course. They could continue to do this until the real estate taxes and accrued interest reached 50% of the assessed value of their property, however the accrued taxes would not have to be repaid until the property was sold, transferred or upon the death of both owners. This ability to accrue real estate taxes would require that any mortgage holder agreed to it, because otherwise the failure to pay taxes would be a breach of the mortgage condition which could give the mortgagee the right to foreclose. So basically this alternative works where there is no mortgage.
 

Another possibility is a reverse mortgage, which basically is a loan on a certain percentage of the value of the property which does not have to be repaid until the owner dies. Interest accrues on the unpaid balance but no payments are required to be paid on the mortgage. There are a variety of methods of taking down the money which your parents could evaluate as to what might best suit them. However, they will still be obligated to insure the property, maintain the property, and pay the real estate taxes. They could not use the accrual method discussed above because that would erode the security of the mortgage because real estate taxes always have a first lien priority. The factor to be aware of with a reverse mortgage is that they do take out a couple of points (2%) up front and there are closing costs so if your parents decided that they might want to move to Florida in a couple of years the actual cost to them would be quite expensive because of the up front closing costs. The reverse mortgage works best from a cost perspective if your parents never intend to move out of the house until they are moved to the grave. That, of course, assumes that their health, mental and physical, will permit them to remain in their home for the duration.
 

Either of these methods will enable your parents to increase their disposable income and thereby increase the quality of their lives. The trade-off is a loss in equity in their home.

If you have questions about this or any other real estate matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.