Aging at Home: Benefits of a Reverse Mortgage for Seniors
Key Takeaways
- If you are wondering whether your retirement investments will last, the house you are already living in belongs near the top of the list of answers you consider, since nearly 90% of seniors want to age at home according to the American Association of Retired Persons research, and while some will stay put in a house full of memories rather than downsize, what separates a preference from a plan is working out which of the two is actually feasible for you.
- The money a reverse mortgage puts in your hands is borrowed rather than handed over, so interest is charged on whatever you withdraw, and the Home Equity Conversion Mortgage program open to a qualified homeowner of 62 or older reaches some amount of home equity rather than the whole of it, though whatever is drawn can then be spent at any time and for any reason, on a caregiver or a nursing home as readily as on anything else.
- Harder to enter than it once was, the reverse mortgage a homeowner meets today comes with education and counseling that are mandatory rather than merely offered to whoever asks, a shift that arrived alongside tighter eligibility requirements and on the back of legislation since overhauled, and that combination has improved how useful these loans are for paying the kind of obligation that persists into retirement and beyond, long-term care coverage among them.
- Put a real number on the obligation before deciding how to fund it, because a long-term care policy paying $150 in daily benefits for up to four years at the maximum carries an expected premium that Genworth puts at $4,082.04 annually, a bill that returns every year rather than once, and meeting that premium from home equity is what could leave much of the retirement savings you have already built undisturbed rather than drawn down early.
According to the American Association of Retired Persons (AARP) research, nearly 90% of seniors want to age at home. Some will stay put in their memory-filled home, while others will downsize. Options are plenty. But, it’s important to understand what’s feasible. Will your retirement investments last? What backup options do you have? Your home should be near the top of your list.
Reverse mortgages today
Reverse mortgages, in particular, deserve a closer look. Mandatory education and counseling, tighter eligibility requirements, and overhauled legislation that prioritizes your right to stay in a home — even in situations where you’ve exhausted your available equity — has improved the usefulness of reverse mortgages for paying obligations that persist into retirement and beyond, such as long-term care coverage.
Paying for long-term care
“Using a reverse mortgage to pay for long-term health care — such as a long-term care insurance premiums, payments to caregivers or nursing homes, and modifications to make a home more accessible —can be a wise financial move for seniors,” says Laura Adams, an insurance expert with insuranceQuotes. “Taking a reverse line of credit, through the Home Equity Conversion Mortgage (HECM) program, allows qualified homeowners over the age of 62 to tap some amount of their home equity and spend it anytime and for any reason. You'll be charged interest on withdrawals, but unused funds can accumulate interest over time.”
How it can apply to you...
Let’s say you’re 62, married, living with your spouse in Colorado. Maybe you owe $15,000 on a home worth $160,000, the average according to data provided by the Federal Reserve. You plan to live in your home till you die. Knowing the odds, you sign up for a long-term care policy paying $150 in daily benefits for up to four years if you use the maximum. Genworth puts your expected premium at $4,082.04 annually. Tapping the equity in your home could provide 32 years of payments at $3,942 annually. So, you can feel protected if you need long-term care. And you won't have to touch much (or any, if you receive Social Security) of your retirement savings.
Ready to learn more?
American Financing is a national direct mortgage bank which offers a suite of reverse mortgage products as well as mortage refinancing options. Get educated about your reverse mortgage options now. Also visit our Mortage Refinance article center to make sure you are opting for the right financial vehicle.
These materials are not from HUD or FHA and were not approved by HUD or a government agency.
