In this era of severe inflation, many retired and older adults can choose between filling their vehicles with gas or filling their refrigerators with food. That doesn’t consider the tremendous increase in heating prices that are expected to have a negative financial impact on those U.S. citizens living in four-season climates.
Add to this a household member who is so infirmed they can’t survive without the help of long-term health care, and an already financially stressed, a fixed-income household could easily face bankruptcy.
However, there is some good news for those retired persons who have lived in their family homes for decades. It’s called a reverse mortgage.
Here’s how a reverse mortgage works. People 62 and older who have been paying religiously on their mortgage for years and years are automatically eligible to apply for a reverse mortgage. If approved, they can tap into all that equity they’ve been building up for decades which, depending upon the condition of their home and its location, could result in hundreds of thousands or even millions of dollars.
The best part about a reverse mortgage is that it must never be repaid to the lender until the primary borrower either leaves home or dies. Cash payments can be distributed monthly, or you can receive your proceeds in one lump-sum amount. It all depends on your financial needs and wants.
In the case of a spouse requiring long-term medical care (LTC), a reverse mortgage can be a God spend. According to be reported by Reverse Mortgage Daily, reverse mortgage loans don’t need to be used only for health care purposes. They can be utilized in any number of ways for older persons who are having cash flow problems.
Says the U.S. News & World Report, trends show that it’s becoming more common in the 2020s for borrowers to use their proceeds to pay for LTC such as a nursing homes.
Renewed Popularity for the Reverse Mortgage
Says a certified financial planner and director of transition planning, reverse mortgages are making a comeback in a big way due to a spike in everyday living costs. With the federal regulation that surrounds reverse mortgages, lenders are said to be working on what’s considered an improved mortgage product.
What this means is if your spouse needs to be placed in a nursing home, but the other spouse does not, they should take a serious look at a reverse mortgage. If qualified, it might make perfect sense for them to use their proceeds to pay for the infirmed spouse’s care.
Make Healthcare Plans Sooner than Later
Reverse Mortgage Daily states that while a reverse mortgage is an excellent tool to provide the financing required to afford a nursing home for your spouse, a reputable financial advisor will assist borrowers with identifying other options for their loan cash that they might have entirely overlooked.
What’s important to consider is this: you need to discuss later-life health care as early as your 50s so you can avoid making hasty plans when they are too late to be effective. After all, placing a loved one in a nursing home is a hard, emotional decision. The earlier the planning, the sooner you can deal with what could become a reality within a decade or two.
Avoiding Nursing Home Extravagances
Financial experts agree that when it comes time to consider your spouse’s nursing home care, it’s a best practice to avoid any unnecessary or extraneous extravagances like extra amenities or even a private apartment. These things can spike the cost of nursing home expenses considerably. Again, these issues should be discussed and agreed upon ahead of time.
It’s also very important to remember that the reverse mortgage proceeds are only legitimate if one of the spouses remains in the home. He or she will be considered the primary borrower and living in the home constitutes a state of good standing with the lending bank.
Primary borrower home occupancy is said to be a core requirement in avoiding an acceleration on the payment status of the loan.
Keeping Up with Home Expenses
Your reverse mortgage won’t only be utilized for nursing home expenses. It’s likely you will need a portion of the proceeds to pay for home-related costs such as homeowner’s insurance, property taxes, homeowner’s association fees, repairs, and annual maintenance.
But you can manage these expenses plus the nursing home payments if you qualify for a Home Equity Conversion Mortgage (HECM). Other similar reverse mortgage loans also exist. It’s a good idea to sit down with your partner as you approach your retirement years and study all your reverse mortgage opportunities. It’s an even better idea to consult with a reputable financial advisor who can lead you through the process every step of the way.