Long Term Care & Reverse Mortgages: The Pros & Cons of Using One to in Place
Figuring out how to pay for your aging parent’s care can be a source of stress and contention. Perhaps you and other family members have different ideas of what your loved one needs. Maybe your senior loved one doesn’t want to leave home, but you think that’s best.
Making long-term care decisions is a complex process. One way to bear the brunt of senior care costs is to take out a reverse mortgage on your loved one’s home.
This decision should be made carefully and thoughtfully. Here’s what you should consider before using a reverse mortgage loan to pay for long-term senior care.
A Deeper Look at Reverse Mortgages
A reverse mortgage is essentially the opposite of a homeowner’s loan from the bank. You’re taking out a loan from the sum of home equity your loved one has built over the years. This is known as a home equity conversion mortgage (HECM).
Think of it this way — a reverse mortgage is like asking the bank to loan you back the money you’ve already paid on the home. The reality is often more complicated than this, but it’s a good way to explain things to your loved one.
Reverse mortgages look different depending on the lender you draw one from. Some lenders offer a lump sum payment, meaning everything is paid to you up front. Others offer monthly payments or open lines of credit you can borrow from.
Who Can Get a Reverse Mortgage?
The purpose of a reverse mortgage is to ensure your loved one can age in place. This means they stay home and live a fulfilling life while a caregiver tends to their medical, emotional, and physical needs.
Important Qualifications
Since this is the ultimate purpose of a reverse mortgage loan, your loved one must live at home to qualify. If they have to move to a senior care facility, they’ll have to pay back the loan money. Things can get sticky when a senior loved one violates the terms of a reverse mortgage this way.
To receive a HECM, a senior must be at least 62 years old and already have some home equity. The U.S. Department of Housing and Urban Development requires that the home be in good, livable condition as well.
The Pros: Why Aging in Place Is So Important
Aging at home brings many seniors more fulfillment and happiness than those who move to a long-term care facility. Using a reverse mortgage can give your loved one funds they otherwise wouldn’t have to be able to stay home for years to come.
Familiar places bring people comfort and joy. Seniors are no different. In fact, aging in place may buffer against some of the negative mental health effects of aging, like loneliness, depression, and cognitive decline.
Aging at home also allows your loved one to maintain relationships with their neighbors and close relatives without requiring a visit to a facility. Social health is an important facet of overall senior health.
Consider aging in place as an asset to your loved one’s health. They can continue to live life on their own terms, dictate their own schedule, and remain independent for as long as possible.
Possible Cons of Taking Out a Reverse Mortgage
Reverse mortgages are just like other loans in the sense that they accrue interest. This means the longer you borrow money from them, the more money you end up paying the bank. You could eventually owe far more than you took out in the first place.
There are also fees associated with reverse mortgages. Some are charged up front, and others are rolled into the loan itself. Most reverse mortgages charge an origination fee, which kick-starts the borrowing process. You’ll also pay for every part of the home appraisal and inspection process.
In short, reverse mortgages can be expensive in their own ways. They often leave less equity in the home when a loved one passes away. If inheritance is important to your loved one, a reverse mortgage may not be right for them.
Making the Final Decision: Borrow From the Mortgage or Not?
Taking out a reverse mortgage is a wonderful decision for some families with senior loved ones and an awful one for others. How you pay for your loved one’s senior care is up to your family. Consider the whole picture before committing to any loans or major life changes on behalf of your loved one.
If you or your family member is considering in-home care as part of a plan to age in place, contact Family Matters In-Home Care today for a free consultation. Our team is dedicated to supporting your family and helping older adults enjoy life in the comfort of their own home for as long as possible.
Some of the services offered by Family Matter In-Home Care include: Alzheimer’s & Dementia Care, Bed & Wheelchair Transfer Assistance, Companionship, Housekeeping & Meal Preparation, Personal Care, Recovery Care, and Transportation.
Serving the San Francisco Bay Area and Greater San Diego, Family Matter In-Home Care has offices throughout California.
