Using A Reverse Mortgage To Pay for Long-term Care and Avoid A Nursing Home

 Alternatives to Long Term Care Insurance: Using a Reverse Mortgage and Other Techniques to Purchase Long-term Care Costs

Because long-term care insurance requires you to be in good health, this planning option is not available to everyone, especially older applicants for whom the premiums may also be prohibitive.federally-insured reverse mortgage  If you're at least 62 years of age and you possess your home, make use of a reverse mortgage to pay for care at home or for a long-term care insurance policy that otherwise may be unaffordable.

A reverse mortgage is really a way of borrowing money from the quantity you have already taken care of your house. You're freeing up money that will otherwise only be around for your requirements if you sold the house. You are able to stay in the house and soon you die, without making monthly payments. The loan is repaid when the borrower dies or sells the home. The balance of the equity in the house will go to the homeowner's estate.

Payments could be received monthly, in a lump sum or the amount of money may be used as a distinct credit. The funds received from a reverse mortgage are tax-free.

Whilst the eligibility age is 62, it is better to hold back until your early 70's or later. The older the borrower, the more expensive the total amount of equity available. You can find maximum limits set by the federal government each year concerning how much of the equity could be borrowed. Usually no more than 50% of the worthiness of the house is created for sale in the form of a reverse mortgage.

You can use the funds from a reverse mortgage to cover the price of home-health care. As the loan must certanly be repaid if you cease to call home in the house, long-term care outside the house can't be taken care of with a reverse equity mortgage unless a co-owner of the property who qualifies continues to call home in the home.

Use Your Home to Stay at Home Program
The National Council on the Aging, with the support of both the Centers for Medicare and Medicaid Services (CMS) and the Robert Wood Johnson Foundation, is laying the groundwork for a powerful public-private partnership to increase the usage of reverse mortgages to help buy long-term care. The best goal of the Use Your Home to Stay at Home(TM) program is to increase the correct use of reverse mortgages to ensure that an incredible number of homeowners can tap home equity to pay for long-term care services or insurance.

Reverse Mortgages Can Assistance with Long-Term Care Expenses, Study Says

A fresh study by The National Council on the Aging (NCOA) suggests that using reverse mortgages to pay for long-term care at home has real potential in addressing what remains a critical problem for several older Americans and their families.

In 2000, the nation spent $123 billion a year on long-term care for those age 65 and older, with the quantity more likely to double within the next 30 years. Nearly 50% of those expenses are paid out of pocket by individuals and only 3 percent are taken care of by private insurance; government health programs pay the rest.

In line with the study, of the 13.2 million who're candidates for reverse mortgages, about 5.2 million are either already receiving Medicaid or are at financial threat of needing Medicaid if these were confronted with paying the high cost of long-term care at home. This economically vulnerable segment of the nation's older population would have the ability to get $309 billion in total from reverse mortgages that can help buy long-term care. These results are derived from data from the 2000 University of Michigan Health and Retirement Study.

"There's been plenty of speculation whether reverse mortgages could be the main means to fix the nation's long-term care financing dilemma," said NCOA President and CEO James Firman. "It's clear that reverse mortgages have significant potential to help many seniors to pay for long term care services at home."

In line with the study, out of the nearly 28 million households age 62 and older, some 13.2 million are good candidates for reverse mortgages.

"We've found that seniors who're good candidates for a reverse mortgage could get, an average of, $72,128. These funds could be used to pay for a wide selection of direct services to help seniors age in position, including home care, respite care or for retrofitting their homes," said Project Manager Barbara Stucki, Ph.D. "Using reverse mortgages for several can mean the difference between staying in home or going to a nursing home."

Seniors can decide to take the cash from a reverse mortgage as a lump sum, in a distinct credit or in monthly payments. When they choose a lump sum, like, they might pay to retrofit their home to produce kitchens and bathrooms safer and more accessible - especially vital that you those who find themselves becoming frail and at risk of falling. When they choose a distinct credit or monthly payments, the average reverse mortgage candidate could use the funds to pay for nearly 36 months of daily home health care, over six years of adult day care five days per week, or to help family caregivers with out-of-pocket expenses and weekly respite care for 14 years. They could also utilize it to get long-term care insurance when they qualify.

"Up until now, though, these types of seniors have not tapped the equity within their homes -- estimated at some $1.9 trillion -- to pay for either preventive maintenance or for services at home," noted Peter Bell, executive director of the National Reverse Mortgage Lenders Association. Noting that the typical income of men aged 65 and over is $28,000 and $15,000 for girls, he added, "This study suggests that unlocking these resources might help an incredible number of'house rich, cash poor'seniors purchase the long-term care services they feel best suit their needs."

What is it about Reverse Mortgages that instills apprehension in some Older Americans?

Fears persist regardless of the enthusiastic endorsement of groups such as for instance AARP and the National Council on Aging.

A major reason is apt to be the actual fact that a lot of misinformation has been circulating concerning this very attractive financial tool for those that qualify. Older Americans often consult friends and relatives who're apt to be misinformed themselves.

Because the Reverse Mortgage can be quite a beneficial and safe alternative for Older Americans, it's important to fix the major misconceptions associated with them and allow older homeowners to produce an educated decision about whether a Reverse Mortgage is practical for them.

The absolute most common misconception is " If I obtain a reverse mortgage I may lose my home ".I frequently hear this when I'm advising elders about planning options related to long-term care. The fact is that the federal government requires that the house must stay in the name of the borrowers only. Because the Reverse Mortgage is really a mortgage, a lien is positioned on the property like all the mortgages. This assures that the lender could eventually be repaid but for just the quantity owed that is principle, interests, and closing costs, exactly like any mortgage.

The truly amazing benefit of this kind of mortgage is that -unlike traditional mortgages-there are no monthly payments. Lacking to bother about regular bills has to be among the greatest gifts one could wish for in retirement.

Significantly more than ninety-five (95) percent of Reverse Mortgages approved will be the Federal Housing Administration (FHA) Home Equity Conversion Mortgage (HECM) loans. These loans are guaranteed the full protection of the United States Government through use of a two (2) percent insurance fee paid on all FHA Reverse mortgages.

Another misconception is that Reverse Mortgages are costlier than other mortgages. The reality is that closing costs average no more than one (1) percent greater than a traditional FHA mortgage will be for a passing fancy property. The Reverse Mortgage could even be lower in cost due to the proven fact that conventional mortgages can charge more compared to the two (2) percent origination fee allowed on all Reverse Mortgages.

Another cost factor is of course, the interest rate. The FHA Reverse Mortgage interest rate is on the basis of the one (1) year United States Treasury note rather than the prime rate, which most conventional mortgages use as their base. This provides the FHA Reverse Mortgage a pursuit rate LOWER than most adjustable conventional mortgages.

Another myth about reverse mortgages is that the house goes to the lender following the loan becomes due at death or when the last survivor permanently leaves the home. Within my experience, the loan level of approved is generally about 50% of the appraised value of the home. (The older the homeowner, the higher the quantity available for borrowing because it's assumed that the funds will soon be available for a smaller period.

All the equity left after payment to the lender, goes to the estate or heirs of the borrower. That is exactly the same procedure followed with regular conventional mortgages.

Because the Reverse Mortgage is really a "non-recourse" loan the most the estate will soon be required to cover to the lender is the worthiness of the house during the time of repayment. That is true even when the house value decreased or the borrower lived to an unusually old age.

Another attractive feature of the financing tool is that certain requirements for getting a Reverse Mortgage aren't nearly as restrictive as other loans. Since no re-payment is created as long as one (1) surviving borrower remains in the house, there are NO income or credit requirements. Another requirement is that both spouses must certanly be sixty-two (62) or older with no upper age restriction. The only real other requirement is that the borrowers alone must own the house with no others on the deed. The home may also be in a revocable trust as long as the eligible borrowers are the only real trustees.

All property types are Reverse Mortgage eligible except manufactured (mobile) homes built before June 15, 1976 and co-operatives (Co-ops). Co-ops are likely to be eligible as time goes by when FHA issues final approval. Homes with existing mortgages which can be paid from the equity can obtain Reverse Mortgages.

Still another misconception is that a Reverse Mortgage is taxable and affects Social Security and Medicare. That's NOT the case. Reverse Mortgage proceeds aren't taxable since they are not considered income but is, in fact, a loan.

It should be noted that Supplemental Security Income (SSI) and Medicaid might be affected if you exceed certain liquid asset amounts. We are able to demonstrate how exactly to structure the loan so that a Reverse Mortgage will not affect these benefits.

Now that the myths of Reverse Mortgage have been removed, a qualified homeowner may ask, just how can I get more comprehensive information? Is your local bank the solution? Only a few lenders have been approved for participation by the federal department of Housing and Urban Development, which oversees the program. Most local and regional banks do not offer Reverse Mortgages.

AARP, the Federal National Mortgage Association, American Bar Association (ABA) and the National Council On Aging provide consumer information regarding reverse mortgages. The ABA passed a solution supporting Reverse Mortgages in August of 1995.