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While services are plentiful for elderly adults who need long-term care in the home, paying for them often proves a challenge. For many seniors, a reverse mortgage could be the answer one that would reduce financial burdens and allow them to remain independent and in their homes longer. A recent study by the National Council on the Aging, however, shows that many qualifying older adults are currently not pursuing this option. The report notes that while 67% of older homeowners today have heard of a reverse mortgage, only 9% indicate that they are likely to use this financing option to pay for assistance at home. Many worry that they risk impoverishment, or won’t be able to leave a legacy to their children if they tap home equity. The cost of these loans, and current Medicaid policies on how reverse mortgages affect eligibility for long-term care benefits, also appear to be barriers. “The study shows that reverse mortgages have significant potential to help many seniors pay for help at home or to make home modifications” said NCOA President and CEO James Firman in a statement. “It also points to the need for strong consumer safeguards and lower transaction costs if these loans are to appeal to the millions of older Americans who could potentially benefit.” The council is committed to encouraging the use of these loans as well as helping to remove barriers. In September 2003, the NCOA started the “Use Your Home to Stay at Home” project to help educate the public. How they work Reverse mortgages which target seniors who are cash-rich, but income-poor are loans that allow homeowners 62 and over to convert home equity into cash while living at home for as long as they want. Funds can be received as a lump sum, line of credit, or in monthly payments. Borrowers continue to live in their home and do not make any monthly payments. The loan comes due only when the last borrower moves out, dies or sells the home. According to the study, there are approximately 9.8 million elder households, ages 62 and older, which are dealing with an impairment that can make it hard to live at home. The consumer currently pays much of these associated expenses out-of-pocket. The big problem custodial care. “That’s a huge gap in health insurance coverage in the United States and most people don’t realize that it isn’t a benefit,” says Wen Daniels of Health Insurance Counseling and Advocacy Program in a previous interview with OC Family Magazine. “Few people understand how many gaps there are in the entire spectrum of health care.” Considered a non-medical expense, custodial care is not covered by Medicare. Even though some elders are unable to walk or feed themselves, Medicare does not pay unless the patient requires a skilled nurse to assist with a specific medical need. For these individuals, the extra cash could go a long way to help with family care giving and other long-term care expenses. A borrower 75 years old with a home worth $100,000, for example, could receive a reverse mortgage loan that could pay them $500 a month for almost 12 years. To help determine how much cash your family member could receive, log on to www.aarp.org/money/revmort/ and click on the “loan calculator” icon. The website also offers information on basic loan features and a free guide on reverse mortgages, which includes how to decide if one is right for your loved one. Information on government programs that may offer an alternative to a reverse mortgage is provided as well. Sandy Bennett is associate editor. Highlights of reverse mortgages include: • Unlocks substantial resources for house-rich, cash-poor seniors. • Allows people 62 and older to convert equity in their home into cash while they continue to live at home. • Borrowers continue to own their homes and do not need to make any monthly payments. • Funds can be received as a lump sum, line of credit, or as monthly payments. • The loan comes due only when the last borrower moves out, dies or sells the home. Source: The National Council on the Aging |
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