Reverse Mortgages: A Potential Way to Remain at Home Longer
Under our “system” of paying for long term care, you may be able to qualify for Medi-Cal to pay for nursing home care, but there’s little public assistance for in home care. Most people want to stay at home as long as possible, but few can afford the high cost of home care for very long. One solution is to tap into the equity built up in your home.
If you own a home and are at least 62 years old, you may be able to quickly get money to pay for in home care (or anything else) by taking out a reverse mortgage. Reverse mortgages are a way of borrowing that transforms the equity in a home into liquid cash without having to either move or make regular loan repayments. They permit “house rich” but “cash poor” elders to use their housing equity to, for example, pay for home care while they remain in the home, or for nursing home care later on. The loans do not have to be repaid until the last surviving borrower dies, sells the home or permanently moves out.
In a reverse mortgage, the homeowner receives a sum of money from the lender based largely on the value of the house, the age of the borrower, and current interest rates. Homeowners can get the money in one of three ways: in a lump sum, as a line of credit that can be drawn on at the borrower’s option, or in a series of regular payments. The most popular choice is the line of credit because it allows a borrower to decide when he or she needs the money and how much. Moreover, no interest is charged on the untapped balance of the loan.
Although it is often assumed that an elderly person would want to use the funds from a reverse mortgage loan for health care, there are no restrictions and the funds can be used in any way. For instance, the loan could be used for house repairs or to retrofit a home to make it handicap accessible.
Borrowers who take out a reverse mortgage still own their home. What is owed to the lender (and usually paid by the borrower’s estate) is the money ultimately received over the course of the loan, plus interest. In addition, the repayment amount cannot exceed the value of the borrower’s home at the time the loan is repaid.
Reverse mortgages are not right for everyone and can impact potential Medi-Cal eligibility planning for skilled nursing home care. Consult with your attorney about whether a reverse mortgage fits into your long-term care planning.
For more information, please contact the Law Office of Sean D. Ethington at 661-295-4604 or visit our website at www.ElderLawSite.com.
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