What Is a Reverse Mortgage? How Can They Be Used to Pay For Long-Term Care?

A reverse mortgage is a non-recourse loan where the home is used as collateral to get tax-free cash from the equity of the home without incurring monthly expenses. With a reverse mortgage, the homeowner does not need an income to qualify. There are no income, credit, or health requirements, and there is no effect on Social Security or Medicare benefits.

Reverse mortgages guarantee that the homeowner can stay in the property for as long as he or she lives in the property as his or her principal residence and pays the property taxes and insurance and maintains the property in a reasonable condition, even if the outstanding loan and interest grow to exceed the property’s value. Reverse mortgage fees can be high, although fees are usually rolled into the loan and not paid up front. The costs associated with a reverse mortgage are very similar to those of a conventional loan.

A reverse mortgage can be a sound strategy to:

•          Increase your income

•          Pay unexpected expenses

•          Pay off debts

•          Make necessary changes to your home

•          Make your home more accessible

•          Help you get the home care services you need to remain independent

Reverse mortgages can be used for:

•          Medical bills and prescription drugs

•          Long-term health care

•          Retirement and estate tax planning

•          Daily living expenses

Another important consideration is that any remaining value on the home goes to the homeowner or his or her heirs when the house is sold. Home ownership is often a person’s most valuable asset. It is important to remember that getting a reverse mortgage is essentially the same as you withdrawing the money you would expect to leave to your heirs. 

Free Caregiver’s Guide:

Solid legal and financial planning is critical for a loved one with long-term care needs. Download our free Caregiver’s Guide to learn the critical information you need to know about caring for your loved one.

Jackie Bedard
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