As our loved ones start to get older, we want to do all we can to help them age comfortably. Often times this means caring for them in the safety and comfortable environment of their own home. However, if and when there comes a time that you need a professional hourly or live-in caregiver to take care of your loved one, the issue of cost can certainly be a concern, especially as we realize that our loved ones might need more care than they have allotted for in personal savings.
So what can you do? Accessing home equity to pay for in-home care through a Home Equity Conversion Mortgage (HECM) loan, commonly known as a reverse mortgage, is one possibility. Below is a simple guide to understanding how these loans work and how paying for elder care with reverse mortgages is possible.
What are reverse mortgages?
Reverse mortgage loans are a popular way for seniors who own homes to turn part of their home equity into cash. The money from this type of loan can be used to pay for anything, including in-home care services
Will my loved one get enough money to pay for care?
This questions is dependent on many factors. When trying to determine how much the loan would be worth, you should consider the amount of equity that the borrower (home owner) has in the home, the age of the borrower, current interest rates, the home's appraised value, and the borrower's mortgage balance.
What type of reverse mortgage is best for my aging parents?
The federally-insured Home Equity Conversion Mortgage (HECM) is a popular reverse mortgage because it is protected by the Federal Housing Administration (FHA). This means that the borrower is protected from ever owing more than the value of the house when sold. Also, with this type of loan, the home is the only asset that can be used to repay the loan.
How are the proceeds from the reverse mortgage paid?
Reverse mortgages are flexible in their payment options. Borrowers can get the funds through a lump sum, monthly installments, a line of credit, or a combination of the three.
Can my loved one stay in their home if they get a reverse mortgage?
If your loved one gets a reverse mortgage on their home, they will be able to stay as long as they comply with loan obligations. These obligations include the borrower living in the home as their primary residence, and not leaving the home for more than 12 consecutive months. They are also responsible for paying property taxes, homeowner’s insurance and home maintenance.
What happens to the family home?
If your loved one leaves the home for any reason, any part of the loan that hasn’t yet been disbursed remains as equity in the home. The reverse mortgage becomes due and the heirs are given a reasonable time to sell the home. If the home is sold, the loan balance is paid off from the sale of the home, and any remaining balance will go to the estate.
To determine if a reverse mortgage is right for your and your loved one, take the time to research reputable reverse mortgage lenders who are members of the National Reverse Mortgage Lenders Association. Next, speak with a reverse mortgage professional who will take the time to understand your loved one’s specific situation, calculate estimated proceeds you could receive from a reverse mortgage loan, and provide information on loan risks and benefits.
Once you have determined if a reverse mortgage is right for you and your family, you can look into care options for your loved one. American In-Home Care refers qualified and credentialed hourly and live-in care providers that perform a wide variety of services to help your loved one age in place. Call us today at 1.844.505.0004 to schedule your free, no-obligation consultation to discuss the best options for your loved one.