Eric and Kim retired five years ago and enjoyed their travel vacation. Eric was able to sell his business and received the payout. Kim retired from the same company and received her pension payment. They were financially stable for their early retirement. However, last year Eric had a stroke, and now he is paralyzed on the left side of his body. He had critical illness insurance and received a $200,000 payout. Now, he has been to physical therapy and keeps seeing a specialist in the United States. As his medical insurance did not cover these medical expenses, the insurance payout was quickly depleted. Now, he must stay home with intensive medical care. Currently, Eric and Kim only rely on their CPP, OAS, pension, and annuity as retirement incomes, which were sufficient to cover their living expenses but not Eric's medical treatment. Each month, Kim needs to withdraw $3,000 from their RRSP. If continuing like this, they will deplete all their savings in 10 years. As Eric cannot take care of the house anymore, Kim needs to hire someone to maintain the house, which costs $500 monthly. Their son, Danny, married three years ago and had their first and second child. They have moved to the same neighborhood. When they purchased their house, Eric and Kim helped them with the down payment of $250,000 as their wedding gift. Danny and his wife had a restaurant business in upscale Yaletown. The business was flourishing until the Covid19 outbreak. Danny tried to keep the business floating, so he took a home equity loan from the bank. Eventually, he had to close the restaurant down last month. He lost all his savings and has $250,000 outstanding debt and no income. The bank has been reaching Danny and giving him one month to pay up the loan, or they must foreclose his property to cover his personal and mortgage. Danny has been quiet about his financial situation as he knows Kim already has lots on her plate. However, Kim knows what happened and is concerned about her son and grandchildren. Like other parents, she wants to help and do everything she can for her son and grandchildren. Usually, Eric has been the one to make all financial decisions, and everything is left for Kim to decide now. Kim reached out to you and asked about a reverse mortgage as she grabbed a pamphlet from her bank. Firstly, she thought about selling the house and downsizing to a small place. To make this, she might be able to decrease their housing expense. She asked a realtor to estimate her property market value. Even though it is not selling the market due to the interest hike, her house can be sold at $2 million. Her realtor suggests waiting for a while to see how the market goes in the second half year. The realtor had her last client's property listed for six months before receiving an offer and sold 20% below the listing price. Besides, Kim does not know what kind of property they should downsize. They have lived in the house for the last 25 years, and it is spacious to accommodate two families. More importantly, Eric is attached to the house as well. Another option is the reverse mortgage. Kim booked an appointment with you three days ago and would like to know about a reverse mortgage and weigh each option's pros and cons before making any decision.

Question - Provide Recommendation with explanation

Recommendations

This section provides strategies for the client to consider that address the issues or take advantage of the opportunities. Each option should be based on evaluating the quantitative and qualitative factors and potential implications across financial planning areas. You should discuss the advantages and disadvantages of each option presented.