Using Reverse Mortgages to Fund Long-Term Care

January 10th, 2017

Longevity in America is at an all-time high, which means many people will be living for much longer after they retire. But this also means they will need to have more money to pay for things like long-term care.

There are numerous ways people can pay for health care in their later years, but one option worth exploring is a reverse mortgage line of credit, NerdWallet reports.

The line of credit in particular can be especially helpful for those homeowners who may not need extra funds right away, but may need to tap into them down the road if their health declines.

“As you use this available money, you don’t have to pay a monthly bill as you would with traditional home equity loans; the money is just subtracted from the equity in the home,” the article says. “The line of credit comes due either when you move out of your home or die, in which case you heard or estate could pay the loan back either through the sale of the home or other means.”

There is another case though in which the loan would become due and payable and that is if the borrower were to stop paying property taxes and homeowners insurance, or if they let the home fall into disrepair, which the article did not point out.

In addition to having the line of credit available to the borrower in case of medical emergencies, there are advantages of getting a reverse mortgage over a home equity line of credit (HELOC), the article points out.

Though a HELOC is a similar concept to a reverse mortgage line of credit, with a reverse mortgage the borrower doesn’t have to make monthly payments at all. The credit line with a reverse mortgage also has the opportunity to grow over time, but with a HELOOC it is usually a fixed amount that the lender could freeze or cancel at any time.

“Having as many resources as possible to cover long-term care needs is an important part of a holistic financial plan,” the article says. “A reverse mortgage line of credit can ensure you’ll have funds readily available at the time of need.”