If you’re looking for ways to cover the cost of memory care for your senior loved one, you may have come across the option of a reverse mortgage. But what is it, and how can it help you pay for senior living and memory care costs?
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What Is a Reverse Mortgage?
A reverse mortgage is a special type of loan that’s available to homeowners who are age 62 or older. In a traditional mortgage, you make monthly payments to the bank to pay for your home. A reverse mortgage, however, lets you borrow against the equity in your home – the bank pays you. Here are some important points to know when it comes to a reverse mortgage for seniors:
- You can either take the money as a lump sum, a series of monthly payments, or as a line of credit.
- The loan doesn’t have to be repaid until the borrower sells the home, moves out of the home permanently, or passes away.
- This type of mortgage is usually used by retirees to cover unexpected expenses or to pay for the costs of long-term senior living or memory care.
How Can a Reverse Mortgage Be Used to Pay for Memory Care?
If your loved one qualifies for a reverse mortgage, you can use the funds for almost anything. This includes memory care support. A reverse mortgage can be helpful if savings and income aren’t enough to cover memory care costs for your loved one.
There’s one thing you need to keep in mind, though – the borrower has to live in their home full-time. It has to be their primary residence, so if your loved one has to move into a memory care community full-time, things can become a little complicated. This solution may be best if only one spouse is moving into an assisted living community while the other ages in place at home.
In some cases, families will obtain a reverse mortgage while their loved one is living at home and use the loan to cover the costs of in-home memory support or adult day care programs. However, once a senior leaves their home and moves full-time into a senior living community, the home may have to be sold. This will trigger the repayment of the reverse mortgage.
Still not sure if a reverse mortgage for seniors is a good idea for covering memory care costs?
The Pros of a Reverse Mortgage
Here are a few reasons why families might consider a reverse mortgage for seniors:
- You get access to equity without having to sell the home. This means seniors can tap into the value of their home but can still age in place if they want to.
- You have flexible payout options. With a reverse mortgage for seniors, you can opt for a lump sum payment, monthly payments, or even a line of credit. You get to decide which type of payout benefits you the most.
- Your senior loved one won’t have to make monthly loan payments. This can be helpful when you’re trying to manage the cost of memory care services. You won’t have to start repaying the loan until your loved one moves into a senior living community, or you sell the home.
- It can help to supplement other income. If your loved one’s passive income or savings aren’t enough to pay for memory care support costs, a reverse mortgage can help bridge that gap.
The Cons of a Reverse Mortgage
What are the cons of a reverse mortgage for seniors, though? Here are some of the perceived drawbacks you should think about:
- You do have to repay the loan. At some point, you’ll have to pay back the reverse mortgage with interest. This usually means that the home will need to be sold when your senior loved one moves out.
- It can reduce inheritance. Reverse mortgages borrow against home equity, so there may not be much equity left when it’s time to sell.
- There are fees and interest to consider. A reverse mortgage for seniors may come with origination fees, closing costs, and ongoing interest. All of this can also eat into the equity of the home over time.
- The borrower has to remain in the home. This is the biggest catch for some families. If your senior loved one has to move into a memory care community full-time, the loan will typically become due for payment.
Is a Reverse Mortgage Right for Your Senior Loved One?
A reverse mortgage for seniors can be a great tool depending on your loved one’s care plan. If they want to remain in their home for as long as possible but need some extra income to help with in-home memory care services, it can be a viable solution. However, if your senior loved one plans to move into a memory care community full time, a reverse mortgage may not be the best option.
Moving out can trigger loan repayment, so in this scenario it may be better to sell the home outright or look into other options. Our team of advisors at Terra Vista can help you explore all of the possible solutions and give you the guidance you need to make a confident decision.
Get the Guidance You Need from Terra Vista
Need help exploring the options when it comes to paying for memory care? Download our FREE guide to financing and affordability of memory care at Terra Vista.
After you’ve read through it, our skilled team of advisors is happy to help you determine next steps.! Contact us today to schedule a chat or take an in-person tour to explore our beautiful community and sit down with us. We’re here to guide you into this next chapter of life.
