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“I know that my mom is still here today because we have been able to help her get the round-the-clock care she needs and live in the comfort of her home.” – Robert L., caregiver
As a frequent panelist at Fearless Caregiver Conferences, we have lively and sometimes emotional conversations with our audience who has the daunting responsibility of ensuring loved ones receive the care they need to live comfortably. As caregivers, we want to help our aging relatives live out their golden years as they wish--with respect and dignity, for as long as they possibly can, in the familiarity of their own homes. Today, many seniors and their adult children caregivers consider accessing home equity to pay for in-home care through a Home Equity Conversion Mortgage (HECM) loan, commonly known as a reverse mortgage.
The following frequently asked questions can help guide caregivers and their loved ones determine if a reverse mortgage loan is right for them.
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What is a reverse mortgage?
Since the early 1960s, reverse mortgage loans have emerged as a popular tool to help senior homeowners convert a portion of their home equity into cash. The loan is called a reverse mortgage because the traditional mortgage payback stream is reversed. Instead of making monthly payments to a lender, the lender makes payments to the borrower, and the homeowner no longer makes monthly mortgage payments.
Loan proceeds can be used for anything, including paying for the cost of in-home care.
Will my loved one get enough money for his/her care needs?
The amount of money a borrower receives from a reverse mortgage loan is dependent on a number of factors. These include the borrower's age, the amount of equity a borrower has in the home, current interest rates, the borrower's mortgage balance, and the home's appraised value.
What type of reverse mortgage is best for unexpected medical emergencies as my parent/loved one ages?
Many senior homeowners who apply for reverse mortgage loans have chosen the federally-insured Home Equity Conversion Mortgage (HECM). Protected by the Federal Housing Administration (FHA), this type of reverse mortgage is a non-recourse loan. What this means to the borrower is that they are protected from ever owing more than the value of the home when sold. In addition, the home is the only asset that can be used to repay the loan.
How are reverse mortgage proceeds paid?
A reverse mortgage loan offers flexibility in payment options. Borrowers may receive funds in a lump sum, monthly installments, as a line of credit, or a combination of the three.
Will my loved one have to leave the home if he/she gets a reverse mortgage?
If your loved one obtains a reverse mortgage, they will be able to age in place at home as long as they comply with loan obligations. The borrower must live in the home as their primary residence and may not leave the home for more than 12 consecutive months. They are also responsible for paying property taxes, homeowner’s insurance and for home maintenance.
What happens to the family home?
If your loved one leaves the home, any part of the loan that hasn’t yet been disbursed remains as equity in the home. The reverse mortgage becomes due and the heirs are given a reasonable time to sell the home or refinance. If the home is sold, the loan balance is paid off from the sale of the home and any remaining balance will go to the estate.
To determine if a reverse mortgage is right for your loved one, it’s important to take the time to research reputable reverse mortgage lenders who are members of the National Reverse Mortgage Lenders Association. Next, speak with a reverse mortgage professional who will take the time to understand your loved one’s specific situation, calculate estimated proceeds you may receive from a reverse mortgage loan and provide information on loan risks and benefits.