A reverse mortgage can offer access to the funds you need to “age in place.”
As the Baby Boomer generation keeps rolling into retirement, there’s a seismic shift happening in how we envision our golden years. With over 11,000 Americans turning 65 every day through 2027,1 their next chapter is being marked by a new anthem: independence.
Today’s retirees want to stay put, plain and simple, in the cozy confines of the homes they’ve made countless memories in. According to a report from the University of Michigan, a majority of Americans (88%) reported that aging in place – remaining in their current homes for as long as possible – is important to them.2
As the desire to age in place continues to surge, fewer Americans are living in nursing homes, as an increasing percentage are opting to live in traditional homes.3 So, what exactly, is fueling this growing trend of aging at home? There are several key factors at play:
- Autonomy. 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 toward 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.4 And that’s not all – a 2019 study from The Journals of Gerontology found that older adults benefit from increased physical activity, better moods, and fewer negative feelings when they engage in frequent social interactions beyond their immediate circle of family and close friends.5
- 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.
It turns out, the old saying, “There’s no place like home,” rings truer today than ever before. But here’s the kicker: despite the overwhelming desire of Americans to age in place, few homes are suitable to accommodate a variety of aging needs. In fact, figures from the U.S. Census Bureau estimate that just 10% of American homes are “aging ready.”6 Slippery surfaces, uneven flooring, second-floor bedrooms, and narrow doorways have the potential to pose major challenges for individuals with mobility limitations.
Fortunately, there are plenty of modifications that can be made throughout the home to create a safer environment conducive to aging in place. But it’s no secret that home renovation projects, such as retrofitting a bathroom or improving accessibility, can cost thousands. Couple these expenses with the ongoing costs of personal care, housekeeping, or landscaping services, and the price tag may seem downright daunting. If you’re a senior on a fixed income, where will the money come from? Your home itself may hold the key…
How can home equity help?
Leveraging a reverse mortgage, you can 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. As with any mortgage, you must still meet your loan obligations, keeping current with property taxes, insurance, and maintenance.
Then, you can take the remaining income tax-free7 funds as a lump sum, in monthly payments, as a line of credit, or in any combination8 – and can use the money however you wish. Many people opt to use the funds to make home updates, offset healthcare costs, or plan for future needs such as long-term care services.
And with a reverse mortgage, the title remains in your name, so you still own the home.9 As long as you meet the terms of the loan,9 it doesn’t become due until a maturity event, such as when the last borrower permanently vacates the home.
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 right loan for you will depend on your individual situation and your financial needs. But when you compare a reverse mortgage line of credit to a HELOC, the reverse mortgage offers a number of key 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.9
- A HELOC can be reduced or frozen by the lender at any time. With a HECM reverse mortgage, the lender cannot reduce the amount available to you.
- The unused portion of a reverse mortgage line of credit grows over time.10 A HELOC does not grow over the life of the loan.
- Independent, HUD-approved counseling is required 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 hoping to age in place, considering a reverse mortgage line of credit before opting for a HELOC could be a wise move.
While home is where the heart is, for many, it’s also where the wealth is. With today’s seniors accounting for record amounts of home equity, you may be surprised to see how much wealth is built up in your home. This additional cash flow could offer a lifeline to unlock funds necessary to age in place. It’s a way to rewrite your next chapter without leaving the place you love.9
At Longbridge Financial, we’re committed to responsibly helping homeowners reshape their financial future by educating them on unlocking the power of home®. Our team will get to know you, your home, and your financial goals as we discuss your options.
We’ve helped countless seniors leverage their home’s equity to continue to live out their golden years from the comfort of their home – and we can help you, too! For more information or to see how much you may qualify for in reverse mortgage funds, contact the Longbridge team today.
