Helping Family Members Cash Flow a Bad Situation

[Scott Trench]

A friend of mine has a tough situation they are facing. Two elderly relatives (a couple) are having serious health issues. They have effectively no assets except for a paid off house (worth around $300K in Illinois). 

My friend has helped them create a budget, and with their existing cash position, income sources, and net spend (including $180/day assisted living) they have about three months of runway left. 

They've listed their house on the market, but the worry is that they may run out of cash before they can sell the place. To solve that, there are two options:

1) They take out a HELOC or other asset-based loan on the property. This has proven difficult, and they've been denied due to a lack of income.

2) My friend has the means to put in place a mortgage on the property personally. For example, a $25,000 - $50,000 lien at 0% interest. While this is very doable, there is fear that the borrower's heirs may have difficulty understanding down the line why there is a lien against the only major asset they are likely to inherit. There's also just an understandable little bit of a tendency towards, where possible, trying to avoid mixing family/money. 

The preference here is for option 1 - does anyone have any recommendations for lenders that can do that?

If option 1 is impractical, does anyone have any tips for option 2 to help make sure that all ducks are in a row (perhaps Illinois real estate attorney recommendations, tips for ensuring that the lien is properly recorded to ensure ultimate repayment, etc.)?

Just to set the tone, this is my friend's family, and leaving them out to fend for themselves is not an option being considered. 

[Ellis San Jose]

They won't qualify for any traditional financing because of lack of income.

A reverse mortgage may be available.

Tread carefully with solution #2.  Consult with an attorney who specializes in Elder law if that's the route they want to explore.