Using a Reverse Mortgage to Age in Place

Jim and Julie have lived in Northern Virginia for forty years and have no plans of moving. They are original owners of their home and their mortgage has long since been paid off. They are active in their community and truly love their neighbors and their friends, and they have their three children and nine grandchildren living nearby. They have some physical limitations, but nothing that a few renovations to their home can’t help.

Jim and Julie hope to age in place for as long as they can, but they need money to make the necessary renovations and for day-to-day living. With the price of homes in our area, they currently have $600,000 in equity in their home.

Their children all have good jobs and are comfortable financially. The main concern for their children is that their parents age comfortably in place and are close by. Jim and Julie’s need for money and their children’s situation is what is driving them to learn more about reverse mortgages, as a way to age in place comfortably.

For Those Who Want to Age in Place

Although long-term care facilities are a necessity for some, many seniors want to have the option to remain in their home and age in place first. Staying at home allows seniors to remain in a comfortable and familiar place while staying close to family and friends. Aging in place can also save a significant amount of money over moving to an assisted living facility.

In fact, a new Bankrate survey says 62% of homeowners never plan to move. If you’re one of those who plans to age in place, you may at some point need to consider using your home equity to help do it, by taking out a reverse mortgage.

A Reverse Mortgage to Age in Place

With a reverse mortgage, such as the Home Equity Conversion Mortgage (HECM) insured by the Federal Housing Administration (FHA), a lender lets you borrow against your home equity tax-free while you live in the home and interest accrues. You can take the money as a lump sum or a line of credit to tap when needed (for say, a home improvement to age in place or a financial emergency). The FHA insures reverse mortgages for homes with assessed values of up to $679,650.

So, if your home equity is your biggest (or only) asset, you’re short on cash, and you don’t have any other viable way to get the money you need for the expenses of daily life, you may need to take out a reverse mortgage to be able to age in place.

Advantages of Reverse Mortgages

Before getting a reverse mortgage, you’ll want to meet with an experienced reverse mortgage advisor, such as myself. For those of you who don’t know, I am a licensed reverse mortgage advisor with Quontic Bank, the only mortgage company in country, to my knowledge, which allows reverse mortgages on homes inside of an irrevocable Medicaid asset protection trust. I am a strong advocate for reverse mortgages to allow people to age in place, and I do what I do to help our clients who desire to use their home equity to pay for in-home care so they are not forced to move to a senior facility if that is not their wishes.

These are some of the advantages of using a reverse mortgage to age in place:

• A reverse mortgage enables homeowners over age 62 to convert a portion of their home equity into income tax–free funds to pay for in-home care, medical devices and equipment, and home accessibility modifications necessary to age in place during declining health — while potentially insulating their other assets from significant depletion.
• A reverse mortgage can provide you monthly income to help you cover your retirement expenses and, in the future, your long-term care expenses.
• You won’t have to move out or give up the title to your home or sell it to get access to the money.
• A reverse mortgage can help you delay cashing out your retirement savings. This can be beneficial if your investments are performing well, or if the time isn’t right to liquidate them to free up cash.
• You don’t need to own your home free and clear to qualify for a reverse mortgage. In fact, the vast majority of borrowers use the loan proceeds to pay off an existing forward mortgage.
• You’ll never owe back more than the value of the property, nor can the lender ever come after your children for more than the value of the property.
• You don’t need current income to qualify for a reverse mortgage, but you must pay property taxes and homeowners insurance on time or you will lose the home and the loan.
• A reverse mortgage might help you delay Social Security and increase your ultimate Social Security benefits. For every year you delay Social Security past your full retirement age, you’ll get an 8% boost in benefits up until age 70. This extra income could be crucial as you navigate life later on as a retiree, and this extra income can seen as helping to offset the interest that is accruing on the reverse mortgage loan.
• You aren’t required to make principal and interest payments on a reverse mortgage while you’re living there, but if you don’t, the balance will of course grow over time. The loan must be paid off after you move, sell the home, or die.
• If you should need nursing home care in the future, as a general rule, a reverse mortgage does not affect Medicaid eligibility. Keeping money in a reverse mortgage line of credit in most states does NOT count as a resource for Medicaid eligibility purposes so long as the house itself is an exempt resource. However, transferring money from a reverse mortgage line of credit to a bank account and leaving it there past the end of the month would convert the exempt home equity into a countable resource and that could make you lose your Medicaid eligibility.
• If you are one of our Living Trust Plus® clients, or considering establishing a Living Trust Plus® income only trust, you can obtain a reverse mortgage even though your house is titled inside of your Living Trust Plus® income only trust. There are very complex rules for this, so you’ll need to consult with me for more details.
• A HECM can sometimes outperform long-term care insurance policies in terms of the amount of money available for care, the versatility of those funds, startup costs, and ongoing out-of-pocket costs. Read this article for more details.
• If you’re aging in place and having a hard time keeping up with your living expenses, a reverse mortgage could give you access to money you don’t need to worry about paying back while you’re alive. And if you aren’t worried about leaving your home to your children, it could be a smart solution to your financial woes.

Planning for Long-Term Care

If you or your loved one is facing the possible need for long-term care and/or thinking about getting a reverse mortgage, you should get an opinion from an experienced elder law attorney who is also experienced with reverse mortgages, such as myself, before moving forward. Please call us to make an appointment for an initial consultation:

Fairfax Elder Law: 703-691-1888
Fredericksburg Elder Law: 540-479-1435
Rockville Elder Law: 301-519-8041
DC Elder Law: 202-587-2797

If you’re interested in a reverse mortgage for yourself, please call us at 703-691-1888.  As mentioned, I’m a licensed reverse mortgage loan officer with Quontic Bank, primarily in order to help our clients who desire to use their home equity to pay for in-home care so they are not forced to move to a senior facility if that is not their wishes.

Evan Farr
Loan Officer
NMLS ID: 1740496
425 Broadhollow Road Suite 302 Melville, NY  11747

*Prequalification provides you with an estimate of how much you can borrow to purchase a home, based on our preliminary review of credit information. This does not represent an offer to enter into a loan agreement. Loans subject to credit approval. Not all loan products or terms are available in all states. Normal credit qualifications & other terms and conditions apply. Products, rates & terms subject to change without notice.
Equal Housing Lender | Quontic Bank™ | NMLS ID: 303906