{"id":9130,"date":"2016-04-18T07:48:21","date_gmt":"2016-04-18T12:48:21","guid":{"rendered":"https:\/\/www.senioradvisor.com\/blog\/?p=9130"},"modified":"2020-10-14T08:35:03","modified_gmt":"2020-10-14T13:35:03","slug":"can-reverse-mortgage-pay-for-senior-care","status":"publish","type":"post","link":"https:\/\/d30braiqprupoq.cloudfront.net\/blog\/2016\/04\/can-reverse-mortgage-pay-for-senior-care\/","title":{"rendered":"Can a Reverse Mortgage Help Pay for Senior Care?"},"content":{"rendered":"

Can a Reverse Mortgage Help Pay for Senior Care?\"Can<\/h1>\n

Senior care options are expensive. One of the biggest concerns many seniors have is figuring how they\u2019re going to pay for the care they\u2019ll increasingly need as they age. No matter how independent you are, there\u2019s a good chance that you\u2019ll reach a point when hiring someone to take care of you will no longer be optional. <\/span><\/p>\n

One option many seniors consider to help fund senior care is a reverse mortgage. <\/span><\/p>\n

What is a Reverse Mortgage?<\/h2>\n

A reverse mortgage<\/a><\/strong> is a type of loan available to homeowners over 62 that allows them to turn the value of their home into cash to help cover day-to-day expenses as they age. It works exactly as it sounds \u2013 instead of paying money to the lender each month as with a traditional mortgage, the lender pays money to the homeowner. <\/span><\/p>\n

Often they\u2019ll pay it in a set amount monthly, but some types of reverse mortgages include options for receiving it as a lump sum or a line of credit. Unlike a traditional mortgage, the lender doesn\u2019t claim ownership of the home. The owner remains on the title and is still responsible for taxes, HOA fees, and homeowner\u2019s insurance. They\u2019re simply expected to pay the loan back when they move out, die, or sell the house. <\/span><\/p>\n

Reverse Mortgage for Senior Care<\/h2>\n

In order to qualify, the home you take out the reverse mortgage on has to be your primary residence and you must plan on continuing to live in it. For that reason, a reverse mortgage doesn\u2019t make sense for someone looking for help with the cost of moving into assisted living or nursing home care. <\/span><\/p>\n

Reverse mortgages do make a lot of sense for someone hoping to age-in-place with the help of <\/span>in-home care<\/a><\/strong> and potentially costly <\/span>home modifications<\/a><\/strong>. <\/span><\/p>\n

They\u2019re also a common choice for married couples in which one spouse needs assisted living or nursing home care, but the other can continue living in the home. With one spouse staying in the house, they can still qualify and use the money to help with the cost of care for the other spouse, but neither will have to worry about paying the loan back until they\u2019ve either both moved out or died, in which case the home can be sold to cover the cost of the loan. <\/span><\/p>\n

Types of Reverse Mortgages<\/h2>\n

There are three main types of reverse mortgages seniors can consider. <\/span><\/p>\n

1. Single-Purpose Reverse Mortgage<\/h3>\n

Single-purpose reverse mortgages are made by state or local governments and are only available in some localities. The upside to single-purpose reverse mortgages is that they have low interest rates and they\u2019re usually easy to qualify for; the downside is that you\u2019re limited in what you can use them for.<\/span><\/p>\n

The entity making the loan will specify what the funds can be spent on and you have to be careful to keep your spending of the money within their restrictions. \u00a0<\/span><\/p>\n

2. Proprietary Reverse Mortgage<\/h3>\n

Proprietary reverse mortgages are private loans that are sometimes offered by lenders on high-value homes. The main reason to go for a proprietary reverse mortgage is if you want a big advance on the loan, but many borrowers will have a hard time qualifying for these unless they live in homes worth a lot. <\/span><\/p>\n

3. Home Equity Conversion Mortgage<\/h3>\n

Home equity conversion mortgages (HECM)<\/strong><\/a> are the option that most seniors will want to go for, if they choose to go the route of a reverse mortgage. They\u2019re federally insured and can be used for any purpose you choose. <\/span><\/p>\n

Unfortunately, they can be expensive. The upfront costs in particular are often high, so they only make sense if you expect to stay in your home for a long time and take out a considerable amount of money. If you just need a little bit to get by temporarily, then the costs to get started with an HECM aren\u2019t likely to pay off.<\/span><\/p>\n

Before you\u2019re able to take out an HECM, you need to meet with a counselor so you fully understand the terms and can make an informed decision. That\u2019s not just advice \u2013 it\u2019s a requirement in order to qualify for the loan. <\/span><\/p>\n

Due to the flexibility in how you can use them and the fact that many seniors can qualify, HECMs are likely to remain the most popular choice for reverse mortgages and are probably your best bet if you\u2019re considering one.<\/span><\/p>\n

The Pros of Reverse Mortgages<\/h2>\n

Anybody with good credit has a number of different loan options to consider, so why go with a reverse mortgage? They offer a few notable benefits that make them a smart choice for many seniors:<\/span><\/p>\n

    \n
  • They\u2019re legally protected to ensure that the borrower will never owe more on the loan than the house itself is worth. You can count on you or your family being able to pay off the loan by selling the house.<\/span><\/li>\n<\/ul>\n
      \n
    • They\u2019re easier to qualify for than many loans since there are no income or credit qualifications. As long as you own your home or have paid off most of your mortgage, you\u2019re likely to qualify.<\/span><\/li>\n<\/ul>\n
        \n
      • There\u2019s no expectation of paying the loan back until you either move or die.<\/span><\/li>\n<\/ul>\n

        If you managed to purchase property when you were young, then that decision can pay off in helping you with living expenses as you age. But only if your situation is a good fit for a reverse mortgage.<\/span><\/p>\n

        The Cons of Reverse Mortgages<\/h2>\n

        Many seniors take out reverse mortgages only to realize later that it wasn\u2019t actually the right choice for them. You have to make a careful consideration about what you really want and need and whether or not the reverse mortgage will help you achieve it in the long-term.<\/span><\/p>\n

        Some of the risks that come with a reverse mortgage can be serious:<\/span><\/p>\n

          \n
        • If you use up all the equity you have on the home early into your retirement years, you\u2019ll be stuck with nothing left for your remaining years.<\/span><\/li>\n<\/ul>\n
            \n
          • If you were planning to leave your home to family members after your death \u2013 and if any of them is counting on it \u2013 then a reverse mortgage will put them in the position of having to cough up a lot of cash fast in order to keep the home.<\/span><\/li>\n<\/ul>\n
              \n
            • As with any loan, the amount you take out will need to be paid back with interest (although with the aforementioned assurance that you\u2019ll never have to pay back more than the house is worth).<\/span><\/li>\n<\/ul>\n
                \n
              • If you have to move out of your home soon after taking a reverse mortgage due to needing assisted living or nursing home care, you\u2019ll have to start paying back the loan a year after the move.<\/span><\/li>\n<\/ul>\n

                If you believe the old adage that nothing in life is free, then you shouldn\u2019t be surprised that the same is true of a lender offering you money. If your home is special to you or your family, then the reverse mortgage may present a bigger risk than the money you get would be worth. <\/span><\/p>\n

                In certain situations, a reverse mortgage can be a lifeline to help cover necessary expenses, but don\u2019t be deceived \u2013 it does put your home at risk. Taking out a reverse mortgage isn\u2019t a decision anyone should take lightly. \u00a0Consider carefully whether or not it\u2019s the right choice for you and talk it over with your loved ones before doing anything rash. If you\u2019re still not sure whether it\u2019s a good move for you or not, talk to a financial advisor. An expert can help you see the issue with new eyes and make sure you\u2019re making the best choice for your long-term financial security. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

                Can a Reverse Mortgage Help Pay for Senior Care? Senior care options are expensive. One of the biggest concerns many seniors have is figuring how they\u2019re going to pay for the care they\u2019ll increasingly need as they age. No matter how independent you are, there\u2019s a good chance that you\u2019ll reach a point when hiring someone to take care of […]<\/p>\n","protected":false},"author":2199,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[200,162],"tags":[287,121],"class_list":{"0":"post-9130","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-families-caregivers","7":"category-retirement-planning","8":"tag-financial-assistance","9":"tag-senior-care"},"acf":[],"yoast_head":"\nCan a Reverse Mortgage Help Pay for Senior Care? - SeniorAdvisor.com Blog<\/title>\n<meta name=\"description\" content=\"Senior care is expensive. One of the biggest concerns many seniors have is figuring how they\u2019re going to pay for it. 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