How Do I Model a Reverse Mortgage?
Suppose you have the option to take out a reserve mortgage, which, for example, entails your handing over 50 percent of the equity in your house at age 75 in exchange for an income stream starting at age 75.
I'd treat this as a change in home at 75 in which you purchase a new home for half the equity you have at that point (I presume the original mortgage will have been paid off by then), but the same property taxes and other expense.
In addition, you need to add in a special expense in that year equal to half the equity (less the transactions costs; i.e., 6 % of the sales value of the home)), and also enter the income stream you'll be getting as a special receipt over the rest of your life. I need to check whether this income stream is taxable. If so, you'd need to enter it as a taxable special receipt.