While public assistance, such as Medicaid, will pay for nursing home care for the elderly, in most states these programs fail to assist those who aren’t ready to sell their homes and wish to seek in-home care. Due to the high costs and lack of public assistance associated with in-home care, many elderly individuals and their families only afford in-home care for a short while, and may think moving their elderly loved-ones into nursing home is the only affordable option.
One relatively unknown solution to this problem is to take out a ‘reverse mortgage’, which allows homeowners over the age of 62 to borrow money from their own equity.
In this financial arrangement, the homeowner receives a sum of money from a lender without having to make regular repayments. The amount of money is based on the applicant’s age as well as the value of the home, and is only available to homeowners with zero debt against the house. Although many use the money to pay for home care assistance, the money can be spent in other ways as well, such as funding retirement or avoiding foreclosure.
Though helpful to those who wish to have permanency in their homes, there are some downsides. For example, closing costs are twice as high as they would be for regular mortgages. These costs can be paid for with the borrowed money, but paying in this manner will significantly decrease the amount of money available to the homeowner.
Additionally, a reverse mortgage could possibly affect one’s eligibility for federal benefits such as Medicaid. If the funds from the mortgage aren’t spent quickly, the government could view them as income, which would impede on the ability to collect on various benefits.
A reverse mortgage might not be a good idea for those who are hoping to secure a hefty inheritance for loved ones. The borrower’s estate must pay the lender the total amount borrowed plus interest. As a result, when the homeowner passes away and the home is ready to be sold, the lender will collect most of the sales proceeds as opposed to any living heirs.
Due to these downsides, reverse mortgages are not commonly utilized, however they are slowly gaining more attention due to longer life expectancies of people and the desire of retirees to stay in their homes instead of moving to a nursing home. As a result, many financial institutions are beginning to integrate reverse mortgage plans into their elder care programs.
A reverse mortgage is a complex arrangement that can be facilitated by a practiced elder law attorney. Adam Tobin is an expert in Massachusetts Medicaid laws. Contact him today to see how he can help you.