Can I Use a Reverse Mortgage to Pay for Assisted Living?

If you fully own or almost own the home you live in, you may be considering getting a reverse mortgage. There are certainly financial benefits to reverse mortgages, especially for seniors who have paid off their home. Many seniors are now considering using a reverse mortgage to pay for in-home assisted living services. But is this the right choice for you? Here we will look at what to consider if you are thinking of getting a reverse mortgage to pay for assisted living.

A reverse mortgage is a financial agreement in which the homeowner agrees to give up equity in their home in exchange for payment. This loan is based on the home’s equity. Generally, the older you are when you take out a reverse mortgage, the more you will receive in payment. Usually, a reverse mortgage is a good idea for those who have reached a certain age and have paid off their house. Once a reverse mortgage borrower dies, the lender is repaid by taking title to the property. They will return any excess equity to the heirs of the former borrowers.

A reverse mortgage will provide payment in the form of cash or through equity lines of credit. Borrowers often choose to receive payment through credit as opposed to cash because equity credit lines increase over time. These payments can be used for many purposes, but a common purpose for older borrowers is for in-home assisted living. Reverse mortgages typically stop paying out once the borrower stops living in the home regularly.

The lending guidelines for reverse mortgages are pretty straightforward. Most of the time, lenders do not check applicants’ credit histories in order to approve them for a reverse mortgage. In order to qualify for a reverse mortgage, borrowers must be at least 62 years old. They must also own a home that has significant equity built up. Many lenders prefer the home to be fully paid off, but some will accept an applicant whose home is mostly paid off. The homes lenders will consider for a reverse mortgage are typically single family homes or 2-4 unit homes where the owner has residency in one of the units.

While a majority of reverse mortgages are through the Federal Housing Administration’s (FHA) Home Equity Conversion Mortgage (HECM) program, your home does not have to have an FHA mortgage to qualify for a reverse mortgage. It is also important to note that as long as one borrower on the loan still resides in the home the mortgage remains in effect. This means that even if one spouse in a couple with a reverse mortgage must leave the home to live in an assisted living facility full-time, the spouse remaining in the home will still be covered with the reverse mortgage.

This is a financial situation you should enter into with some caution. If you are approved for a reverse mortgage, you still need to make sure you are staying current with any property taxes. Frequently, seniors will live off of their reverse mortgage payments while failing to pay for taxes. This can cause your home to be foreclosed on, which would allow the lender to take the home. For this reason, it is a great idea to receive the advice of a real estate attorney or go through financial counseling before you apply for a reverse mortgage.

Veitengruber Law is experienced in handling even the most complex issues of real estate law. If you are considering a reverse mortgage, we can help you with the details. Our attorney, George Veitengruber, can answer all your questions and provide you with custom solutions for your real estate goals.

 

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