Since the Covid-19 pandemic, concerns about care and isolation in long-term nursing facilities have come to the forefront of our minds. At the same time, it’s become easier than ever to stay at home, thanks to the availability of convenient delivery services for essential items like food and medicine.
This combination of factors is making more and more seniors wonder about “aging in place.”
This is an option that allows seniors to remain in their homes as they age instead of moving into a long-term care facility.
Making this decision also means coming up with a plan to pay for related expenses, especially assistance with activities of daily living (ADL). As much as we don’t like to admit it, the statistics show that most of us will eventually need help with these.
In these cases, there are some creative solutions that allow seniors to tap into their home equity in order to access long-term care.
Different Options To Finance Long-Term Care
Long-Term Care Insurance Policy
This functions much like other forms of insurance. You take out a policy in order to receive coverage for medical needs as you age.
But while this has been a tried-and-true, traditional path, it’s not necessarily the best for today. That’s because in recent years the cost of insurance premiums has skyrocketed. In some cases, seniors have seen their rates double or even triple just in the last few years.
Cash-Out Refinance
With a cash-out refinance, you can get a lump sum of cash to cushion the costs of aging in place. This can be a great option if you’d like to refinance an existing mortgage to get better terms.
The downside to this is that you would have to repay the loan over a period of 15 to 30 years.
Reverse Mortgage
A reverse mortgage allows you to take out a loan against the equity of your home. You can receive monthly payments which can assist with the financial needs of aging in place.
The loan comes due when you sell the home or if you have to move into long-term care.
The biggest benefit to this product is that you are not responsible for making loan payments as long as you remain in your home. And it allows you to keep the title of your home free and clear.
The FHA insures most reverse mortgages, so even if the sale of your home does not cover the balance of your loan, they will make up the difference.
To purchase a reverse mortgage, you must be at least 62 years of age. You are also responsible for keeping up with home maintenance and repairs and keeping the home insured.
A potential downside to purchasing a reverse mortgage is the high initial mortgage insurance premium paid to FHA. However, this is typically financed into the cost of the loan.
Another common concern is the long-term effect on heirs. But in most cases, children and grandchildren prefer the peace of mind of knowing a loved one can receive care in the comfort of his or her home.
If you want to learn more about leveraging home equity to fund aging in place, reach out to Angella Conrard and her team of experts today.
