Reverse Mortgage: Using it to Pay Long-Term Care

People who are in their sixties and they own a home, there are a lot of chances that they have heard of the term ‘Reverse Mortgage’ This term …

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People who are in their sixties and they own a home, there are a lot of chances that they have heard of the term ‘Reverse Mortgage’ This term has always been familiar to the elder people. Reverse mortgage has been around for years. Retirees and people who have crossed their sixty years of life use this non-recourse loan, some to build a new house and some to refinance the existing one.

This kind of loan is perfect for people who need a steady income for mortgage or extra payments while living in their home tension free.  Reverse Mortgage can save you from many unexpected financial crisis you may face in or near your retirement. Moving on, we will talk about some of the major aspects which are attached to this loan and how it helps to pay for long-time care.

What is Reverse Mortgage?

A reverse mortgage is basically a loan which is taken by seniors against their home’s equity. The lending platforms, usually a bank, pays the amount to the borrower in lump sum, monthly installments or as a single line of credit. This loan does not have to be paid off until the last owner of the house (if couples sign on the contract) pass away or move away from the house for a year or more. In most cases, the loan is not paid back in increments. The house is sold and the lender is paid back the full money borrowed plus interest.

Reader Tip: read the Plain English version here: https://reverse.mortgage/what-is-a-reverse-mortgage-plain-english

 

*        Application Process:

The application for a reverse mortgage can take up to 4 to 6 weeks to process. There are mainly two steps to apply. The first is to locate a lender and the second is to have a session with a reverse mortgage counselor to understand the correct nature of this loan.

*        Impact on other Government Benefits:

The main benefits of Medicare or Social Security are not affected by this loan. However, Supplement Security Income and Medicaid eligibility may be affected. These affects may vary from state-to-state and are not stagnant in any region.

Facts about Reverse Mortgage:

Ø  Home owners never owe more than what the value of their house is.

Ø  Once the contract is signed, the lenders cannot force the borrowers out of the house as long as they are maintaining taxes and insurance and living in their home as their primary residence.

Ø  The loan becomes due when the borrower sells the house, moves away from the house for one year or more or passes away.

Ø  These loans cannot affect the borrower’s benefits provided by Medicare or Social Security. However, they can affect the borrower’s eligibility for Medicaid.

Ø  These loans can be re-financed, hence removing the tension of a down real estate market.

Ø  The closing costs are from 2 to 4 percent of the value of the loan.

Ø  The value which can be borrowed is between 50 to 70 percent of the home’s value.

Ø  Money can be used anywhere without any restrictions.

When is Reverse Mortgage Appropriate?

*        Single retirees in good health:

 

Seniors can get this loan as there is no care needed immediately. The proceeds can be used to by a Long-Term Care insurance or make modifications to the house.

*        Single retirees with poor health:

Reverse mortgage is a viable option for seniors with poor health as it can pay for in-house care or adult day care which can help improve the deteriorating health of the senior.

*        Married senior couple in good health:

Again, when couples do not need immediate care and they get a reverse mortgage, it is a good decision. They can use the proceeds to refinance the house or they can buy Long-Term Care insurance.

*        Married couple with one senior with poor health:

This is a good and the most common reason to apply for a reverse mortgage. One spouse might need skilled adult care so the other once gets a reverse mortgage. However, both seniors should sign as if one passes away, the second borrower can keep on living in the house.

*        Married couple with poor health:

If both the seniors are ill and they want in-home adult care, this can be a good option for them. Both borrowers can get skilled care from nursing homes living in their own house.

What is Long-Term Care?

Long-term care basically refers to many services which are provided to people who are chronically ill and cannot take care of themselves for long a long period of time. These services can be both medical and non-medical depending on the situation. Providing custodian services which are daily tasks such as dressing, feeding etc. is common in long-term care.

Reverse Mortgage and Long-Term Care:

Long-term care offers many different services which may be needed by a retiree in order to live peacefully. However, buying long-term care can move the retiree to the potential danger of Medicare. A reverse mortgage can help you get a long-term care and access all the services it provides living in their own homes. This will be a way to get in-home care and enjoy your life with monthly payments. You can also get this reverse mortgage for your partner which in need of skilled care. A reverse mortgage can help you get a long-term care for your spouse and increase the life span indefinitely. Long-term care can help you get skilled services in your retirement and a reverse mortgage can be your ticket to that.

Bottom Line:

Reverse Mortgage can be a huge help to elder people who are looking to pay for long-term care. Long-term care can offer you many services and to get these services, you need instant cash. Reverse mortgage is the way to solve that. They say that necessity is the mother of invention, in this case a long-term care is your necessity and a reverse mortgage is the invention!

 

Resources:

How to Finance In-Home Care with a Reverse Mortgage

https://reverse.mortgage/in-home-care-with-a-reverse-mortgage

 

Longtermcare.gov http://longtermcare.gov/costs-how-to-pay/paying-privately/reverse-mortgages/

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