Paying for Home Health Care with a Reverse Mortgage
While home care is undoubtedly rising in terms of need as the population ages, its costs are often noted by prospective patients and clients as a deterring factor.
Government programs help to some extent, but there is still a vast group that would benefit from home health care though they are unable to afford it on an ongoing basis.
Costs vary across the country. On average, a home health aide providing 44 hours of service per week costs $4,576 per month, according to Genworth Financial analysis published in its annual Cost of Care survey. Homemaker services, which include services like housekeeping and cooking, run about $4,385 on average, according to the same survey.
The costs can seem daunting, and many Americans find themselves unprepared to face these ongoing monthly fees.
One mechanism to aid this group is home equity.
“Many senior Americans today haven’t saved enough for the future, but they may be sitting on an unknown solution: their homes. Many people don’t realize they can use a reverse mortgage to pay for home care,” says Cliff Auerswald, president of All Reverse Mortgage Company, based in Orange, Calif.
The aging population lacks in savings to pay for health care in the long term, but as a generation that values homeownership, many have homes that today have low mortgage balances or are paid off in full. As homeowners under this scenario, they may qualify to tap into their home equity through a reverse mortgage.
By doing this, reverse mortgage borrowers can remain in their homes to receive care, and can receive proceeds to pay for it.
For an average valued home in California around $463,000, a borrower may be able to pay for years of home care. In fact, a reverse mortgage line of credit can enable the borrower to withdraw roughly $52,000 per year for seven years—vastly expanding the borrower’s ability to remain at home and completely covering the average cost of care.
In comparison, the same borrower could sell the home and use the proceeds to move into a full-time nursing home, spending on average, more than $80,000 per year and exhausting the home equity much sooner.
Home health providers and private duty care agencies can benefit from having some knowledge around these loans as a way to pay for their care.
Here are a few reverse mortgage basics that in-home care providers can introduce to their clients.
Proceeds can be used for home care. Reverse mortgage proceeds can be used for any purpose of the borrower’s choosing. Once a borrower completes a reverse mortgage, the proceeds are available at the borrower’s discretion. The proceeds are not considered income for tax purposes.
There are different payment options. Borrowers can take a reverse mortgage as a lump sum, as a line of credit, or as monthly or other regular payments. For a client who already has a caregiver scheduled, the monthly payment plan may be a beneficial option to help supplement or cover the costs.
Government insurance protects borrowers. All borrowers who take a reverse mortgage under the Department of Housing and Urban Development’s Home Equity Conversion Mortgage (HECM) program are subject to Federal Housing Administration insurance. As terms of the insurance, borrowers are guaranteed to receive their payments. They are also provided several other reverse mortgage protections under the program.
Reverse mortgages have new rules. HECM reverse mortgages recently have gone through program changes that make them safer than ever for borrowers. They include new requirements around reverse mortgage counseling, a new financial assessment to help ensure borrowers do not default on their loans, and additional protections that are lending credibility to these loans.
“Borrowers can gain peace of mind by tapping into their home equity to pay for home care, so they are not stressing family members or having to move out of their longtime homes,” Auerswald says.
The experts at All Reverse Mortgage® are here to help. To learn how a reverse mortgage can help cover home care costs give us a call Toll Free (800) 565-1722 or request a personal analysis at https://reverse.mortgage/quote.