Using a Reverse Mortgage for Home Care Needs

By The Care Centers.

When people have long-term care needs, they often do not have the financial resources to pay for those needs. In addition, they may not qualify for assistance from Medicaid because they have too much money in the bank and Medicare does not cover most long-term facilities (Who Qualifies to Buy Insurance to Pay for Nursing Home Care?) for those who can no longer live at home. One solution that may help cover LTC costs is using the equity in your home and taking out a reverse mortgage.

Why Use a Reverse Mortgage for LTC Needs?

The average retiree in the United States has less than $100,000 in their 401(k) or other retirement plans. If those assets were turned into a monthly income, they would only account for about $600 per month. That income would not cover living in a LTC facility or even home care expenses. However, Americans had more $7 trillion dollars in home equity. 

What Is a Reverse Mortgage?

Since most people over the of 62 have paid off their mortgages, they can use the equity in their homes to help cover any costs they may have for LTC needs (4 Ways to Pay for Skilled Nursing Facilities). One of the ways to use the equity in your home to your advantage is to take out a reverse mortgage. This type of mortgage allows a homeowner to take out a personal loan based on the amount of equity they have in their house. 

One of the biggest advantages of using this type of financial tool is that there are no limitations on how the money can be spent. In addition, the homeowner can still occupy their house and as long as they are in the house, they do not have to make any payments on the loan. When the house is sold, then the amount of the loan will be recouped upon its sale.

So, if you are able to live in your home, you could use the money from your reverse mortgage to pay a home health care worker or a hospice worker to come in and help you with your day-to-day living needs. You could also use it to pay for elder care or any other services that you need to make it easier on you to still stay in the home.

Disadvantages of Using a Reverse Mortgage for LTC Needs

If you cannot stay in your home due to your health care needs, and there is no one occupying the house, then you would need to pay back the loan on it because it would be considered vacated. However, if you were in a temporary facility, such as skilled nursing facilities, then you wouldn't owe the lender the money you borrowed on the house as that is still your residence.

You can take out a reverse mortgage on your home and defer the payments until you need them or until you sell the house. So, if you took out a reverse mortgage at 62, but you didn't need money for LTC until you turned 70, then you could defer the payments until you turned 70 and needed to cover LTC expenses.


Tags: Home care