A reverse mortgage can offer access to the funds you need to “age in place.”
In a recent survey, 78% of Americans in the Baby Boomer generation said that aging in place—remaining in their current homes for as long as possible—is one of their goals for the future.1 Sadly, only half of them believe that they’ll reach that goal. Of all Americans surveyed, 29% think they won’t have enough money to age in place. Another 24% say their home would be a barrier to aging, because it isn’t suitable for the elderly.
Fortunately, there’s a financial solution that can help address both barriers: a Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage. It helps homeowners ages 62 and older access some of the equity they’ve built in their homes and converts it to cash they can use for any purpose—including making home upgrades and repairs to make it safer and more livable.
In particular, a reverse mortgage line of credit can help you create a financial resource to help cover future expenses. As compared to a standard HELOC (Home Equity Line of Credit), it has a number of compelling advantages—including the fact that no monthly mortgage payment is required.2
Why do so many Americans want to age in place?
- Independence. People understandably have a strong desire to keep control of their daily lives. Making home-improvement upgrades to account for limits in mobility, or hiring help with some of the maintenance chores, can go a long way to making aging in place more practical.
- Community connections. Relationships with friends, neighbors, and community organizations are invaluable. In fact, friends and neighbors could provide just the help they need to remain at home—and being involved in their communities gives people a chance to help others, as well.
- Routines and social interaction. People need both: studies show that daily tasks of self-care and home maintenance help with memory retention.3Older adults who have frequent social contact exhibit 70% less cognitive decline than those who don’t.4
- Family. Once people go into an assisted-living facility or nursing home, family visits may be restricted to certain hours—and traditional gatherings may have to be altered or eliminated. A stable family dynamic provides comfort and familiarity for older adults dealing with life changes due to aging.
While probably not as much as the $75,000+ per year that it costs for an average assisted-living facility5, aging in place still comes with a significant cost. Home renovations, such as retrofitting a bathroom or improving accessibility, can cost thousands. Hiring a personal-care, housekeeping, or landscaping service is an ongoing expense. If you’re a senior on a fixed income, where will the money come from? The answer could be right inside your home.
How can a reverse mortgage help?
A reverse mortgage lets you tap into the home equity you’ve accrued while making your mortgage payments. The proceeds are first used to pay off any existing mortgage, freeing you from that monthly payment and allowing you to redirect the money to pay for other things—which helps you avoid dipping into your savings and other invested assets.
Then, you can take the remaining income tax-free6 funds as a lump sum, in monthly payments, as a line of credit, or in any combination—and use the money for anything you wish.
The title remains in your name, so you still own the home. As long as you meet the terms of the loan—paying property taxes, insurance and for home maintenance—the loan doesn’t come due until the last borrower leaves the home permanently.
Why not just get a HELOC?
While a reverse mortgage line of credit and a HELOC are both credit lines secured against your home, there are several key differences. The better loan for you will depend on your situation and your financial needs. But when you compare a reverse mortgage line of credit to a HELOC, the reverse mortgage has a number of distinct advantages:
- A HELOC requires a monthly payment, adding another expense to your budget. A reverse mortgage pays off your existing mortgage while requiring no monthly payments of its own.2
- A HELOC can be reduced or frozen by the lender at any time. The lender cannot reduce the amount available to you through a HECM reverse mortgage.
- The unused portion of a reverse mortgage line of credit grows over time.7 A HELOC does not grow over the life of the loan.
- A reverse mortgage is insured by the Federal Housing Administration. A HELOC is not.
- Independent, HUD-approved counseling is provided with a reverse mortgage to ensure that you understand your options. You don’t get independent counseling with a HELOC.
If you’re one of the many older adults who hope to age in place, you may want to consider a reverse mortgage line of credit before you take out that HELOC.
To learn more about a reverse mortgage line of credit, call Longbridge at 855-523-4326, or fill out the form on this page for a free info kit. There’s no cost and no obligation.
- Aging in Place in America, Research Report, Fresenius Medical Care, 2020 https://fmcna.com/content/dam/fmcna/live/aging-in-place/Aging-In-Place-in-America-Research-Report-FINAL.pdf
- Real estate taxes, homeowners insurance, and property maintenance required.
- Care.com. Why a Daily Routine is Helpful for People with Dementia.https://www.agingcare.com/articles/daily-routine-for-people-with-dementia-156855.htm
- Greater Good Science Center at UC Berkeley. How Societal Connections Keep Seniors Healthyhttps://greatergood.berkeley.edu/article/item/how_social_connections_keep_seniors_healthy
- National Bureau of Economic Research, Medical Spending of the Elderly.https://www.nber.org/bah/2015no2/medical-spending-elderly
- Consult a financial advisor and appropriate government agencies for any effect on taxes or government benefits.