Paying for In-Home Care: Is a Reverse Mortgage an Option?
By Tyler Plack
Tyler Plack is the President of South River Mortgage. Tyler holds an active FHA Direct Endorsement (DE) underwriting certification and is the author of The Retirement Solution: Maximizing Your BenefitTyler is a seasoned entrepreneur and real estate investor renowned for his expertise in reverse mortgages and his commitment to addressing seniors' equity challenges. Tyler brings a unique perspective to his ventures, having built several successful companies throughout his career. His insights are frequently sought by industry publications, where he is recognized for his vast knowledge in the realm of reverse mortgages.
An avid investor in income-producing properties, Tyler is dedicated to helping seniors navigate their financial needs with compassion and expertise. When Tyler is not helping solve America's retirement crisis, he is a skilled pilot flying airplanes for fun.
For seniors who have significant equity in their homes but may be a little short on cash, reverse mortgages can offer a greater sense of stability. A reverse mortgage lets you borrow against your home equity without having to make monthly loan payments, so it gives you the financial freedom to cover unexpected costs.
Many seniors who take out reverse mortgages use the funds to pay down high-interest debt, pay for home repairs, or supplement daily living costs. Others create emergency funds. But is a reverse mortgage a viable way to pay for in-home care?
Can You Use a Reverse Mortgage to Pay for In-Home Care?
The short answer is yes — you can use reverse mortgage proceeds to pay for in-home care. However, before you decide this is the route you want to take, it’s important to consider reverse mortgage requirements and to look closely at all available options for funding in-home care.
Qualifying for a Reverse Mortgage
Before you start digging into the logistics of paying for in-home care in the future, take a moment to see if you’re a candidate for a reverse mortgage. These are some of the most important qualifications:
- You must be at least 62
- You must either own your home or have substantial home equity
- The home must be your primary residence
- You must continue to pay property taxes and homeowners’ insurance
- You must not have delinquent taxes or other federal debt
- You must complete loan counseling from an approved agency
Before you can be approved for a reverse mortgage, your home will have to pass an inspection. In some cases, you may need to complete repairs before receiving funds. Use our easy reverse mortgage calculator to see how much equity you can unlock.
In-Home Care and Reverse Mortgages: Key Considerations
Just like taking out a traditional forward mortgage, taking out a reverse mortgage is a major decision, and it’s not one you should rush into. Here are some of the most important factors to consider:
Residency Requirements
Some people who would prefer in-home care ultimately need to move to a nursing home or assisted living facility. If you have a reverse mortgage, this may pose a problem.
A reverse mortgage requires you to maintain your home as your primary residence. If you move away for more than 12 months, the loan may immediately be due. If you can’t pay it, you run the risk of losing your home.
However, if you have a co-borrower (like a spouse) who still lives in the home, you’ll still be compliant with the loan terms.
Lump Sum, Installments, or Line of Credit?
If you’re approved for a reverse mortgage, there are three primary ways you can access the proceeds:
- Lump Sum: Receive all proceeds at once
- Installments: Receive regular (usually monthly) payments
- Line of Credit: Only access funds when you need them
If you primarily want to make sure you can afford in-home care if you need it, getting your reverse mortgage as a line of credit may be the best choice. However, if you also anticipate using the funds for other purposes, installments (or even a lump sum) may be more appropriate.
Alternatives to a Reverse Mortgage
A reverse mortgage can help you pay for in-home care, but it’s not your only option. Depending on your income, you may qualify for government programs to help with in-home care. You also may choose to purchase long-term care insurance.
Long-term care insurance premiums can be more costly than many people realize. One option is to take out a reverse mortgage and then use some or all of the proceeds to pay for a long-term care insurance policy.
Plan for the Future
It’s worth considering how your heirs will handle your reverse mortgage after your death. Generally, they can choose one of three options:
- Sell the home and use the proceeds to pay off the loan
- Keep the home and pay the loan themselves
- Deed in lieu of foreclosure (signing the home over to the lender)
After your death, your heirs will usually have some time to decide how to handle the loan and the home. If you do take out a reverse mortgage, it’s worth explaining the situation to your loved ones so they understand their options after you pass away.
Considering a Reverse Mortgage?
A reverse mortgage can grant you freedom and peace of mind during retirement. However, this option isn’t right for everyone. At South River Mortgage, we want to help you find the solutions that work best for you. Get in touch today to learn more. Take a minute to see how much equity you can unlock with our reverse mortgage calculator.
