Unlocking The Power Of Reverse Mortgages For Long Term Care Expenses [Video]

Long-term care is a sobering reality, as 70% of us will require some form of long-term care during our lifetimes. The risks and costs associated with long-term care almost always require home wealth (equity) to be used; it’s just a question of when and how. The modern reverse mortgage enables home equity to be strategically positioned to help mitigate this risk.

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Financing Long-Term Care With Housing Wealth
Homeowners aged 62 and over in the U.S. have experienced impressive growth in home equity (now estimated at over $11 trillion). In fact, for most senior homeowners, the home is their single largest source of savings. So, when exploring viable options for funding long-term care, it’s wise not to overlook or dismiss the home—it’s often where the lion’s share of a senior homeowner’s wealth can be found. While home equity is good, it’s of little functional value unless the home is sold or the equity is tapped. Most older homeowners prefer not to sell and move to finance long-term care and would rather age in the home they know and love for as long as possible.

What Is a HECM and How Does It Work?
A HECM (Home Equity Conversion Mortgage) is the only reverse mortgage insured by the Federal Housing Administration (FHA) and is the most popular reverse mortgage among homeowners.
It allows homeowners 62 and older to access a percentage of their home equity as:
a single-disbursement, lump sum payout of cash at closing
Fixed monthly advances for a set number of months or the life of the loan
A line of credit

Unlike other home-equity release loans, with a HECM, the borrower can pay as much or as little toward the loan balance each month as they wish. Or the HECM borrower can opt to make no monthly mortgage payments at all (though they must live in the home, maintain it and pay property charges, like taxes and insurance).

Financing Long-Term Care With a HECM**
Here are just a few ways HECM loan proceeds can help a borrower fund long-term care:
Pay for long-term care insurance premiums (before needing care)
Fund the deposit on a nursing home (e.g., the care is needed for one spouse and the other spouse still lives at home)
Self-fund professional or informal care for a period of time (e.g., pay for an in-home care nurse while recovering from a fall)
These days, the most popular way HECM borrowers choose to receive their loan proceeds is via a line of credit. For long-term care planning, it can be valuable to establish the HECM line of credit sooner rather than later—well before long-term care is needed. That’s because the unused portion of the available credit doesn’t accrue interest or fees, and the available line grows at the same compounding rate as the loan balance (independent of swings in the home’s value), giving the borrower access to even more funds over time.

In Summary
Retirees face no shortage of risks that can quickly drain or wipe out their retirement savings. When it comes to your health in your retirement years, ensuring adequate health coverage now and a plan for funding long-term care if/when needed is critical. Housing wealth is poised to play a key role for seniors looking to self-fund or insure their future health and personal care needs.

Chapters
00:00 Introduction
01:28 Long Term Care and Retirement
02:15 Home Equity and Reverse Mortgages
03:29 Positioning Home Equity Alongside Long Term Care
05:40 Reverse Mortgage and First Spouse Long Term Care
06:59 Financial Advisors and Reverse Mortgages
08:04 Long Term Care and Your Family

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