If you are like most senior homeowners, you fully intend to enjoy the rest of your retirement years in your home. In the summertime, you’ll be relaxing and enjoying a cool breeze and fresh beverage under the shade of your front porch. In the wintertime, you’ll be in your cozy den, surrounded by your loving family and relishing in the holiday spirit. And in the spring, you’ll be enjoying fresh flowers on your windowsill, as the wafting fragrant smell mixes with the sounds of delighted squeals from your grandchildren playing outside.
Your home is your haven, and the place where you likely hope to age comfortably for the rest of your life. And while you may be sentimental about your home, it is important that you consider the expenses you’ll need to cover during your retirement years—especially as it relates to your care.
According to a U.S. Department of Health and Human Services (HHS) publication, 70% of Americans will require some form of care in their lifetime. Conversely, less than 3% adequately plan for these eventual needs, according to the American Association for Long-Term Care Insurance.
Another study shows that “. . .Not only can care be provided less expensively in the home, but evidence suggests that home care is a key step toward achieving optimal health outcomes for many patients.” Fortunately, a powerful financial planning tool is available to help seniors access the wealth in their homes and help pay for the care they need—when they need it most.
In-Home Care with a Reverse Mortgage
Since its inception in the early 1960s, reverse mortgage loans have quickly emerged as a popular tool to help senior homeowners convert a portion of their home equity into cash. Loan proceeds can be used for anything a borrower may possibly need in retirement, including paying for the cost of medical care or assistance. And for the independent senior, in-home care is the obvious choice. Learn more by reviewing the following frequently asked questions about how to use a reverse mortgage loan for in-home care.
Can a reverse mortgage help me pay for in-home care?
Simply put, yes, it can. For qualifying borrowers, funds received from a reverse mortgage can be used for anything you desire, from help with household chores, to round the clock in-home care.
Will I get enough money for my medical needs?
The amount of money that a borrower receives from a reverse mortgage loan varies from person to person and is dependent on a number of factors. These include the borrower’s age, the amount of equity a borrower has in the home, current interest rates, the borrower’s mortgage balance, and the home’s appraised value.
The best way to find out if the money you receive from a reverse mortgage will be sufficient for in-home care is to conduct some research:
- Find out the different options for in-home care services in your area and obtain a quote or estimate of the cost.
- Research reputable reverse mortgage lenders and speak with a reverse mortgage professional who can break down the numbers for your specific situation and calculate estimated proceeds you may receive from a reverse mortgage loan.
- Compare your reverse mortgage loan estimate with the quoted cost for in-home care services in your area.
What type of reverse mortgage is best for unexpected medical emergencies as I age?
Many senior homeowners who sign up for a reverse mortgage loan have chosen the federally-insured Home Equity Conversion Mortgage (HECM). Protected by the Federal Housing Administration (FHA), this type of reverse mortgage is government-regulated and is a non-recourse loan. What this means to the borrower is that they are protected from ever oweing more than the value of the home when sold. In addition, the home is the only asset that a lender can use to repay the loan.
When signing up for a reverse mortgage, the borrower also has a choice in their disbursement option. This includes the choice to receive funds as a lump sum, monthly installments, a line-of-credit, or any combination of the three. Many borrowers who would like to use the loan as a financial safety net for unexpected medical emergencies choose the standby and growing line-of-credit disbursement option. Because interest is not charged on the unused portion of credit, many senior homeowners feel secure the money is available to use at a moment’s notice for unexpected emergencies.
Will I have to leave my home if I get a reverse mortgage?
On the contrary, if you get a reverse mortgage, you will be able to age in place in your home as long as you comply with all loan obligations, such as paying the property taxes, insurance, and home maintenance. One of the terms of the loan is to live in your home as your primary residence. In addition, you must not leave your home for more than 12 consecutive months. If you do, the loan may become due and payable.
Proper research and planning is essential to a financially solid future that covers the possible need for in-home care. Contact a reputable reverse mortgage lender who is licensed in your state. They can help you understand how a reverse mortgage works and if it is the right loan for you. With your home equity and the right financial tools, you are on your way to securing an independent and comfortable retirement in your home.