Mom and Dad are living in their home but their health is failing. They do not yet need nursing home level care, but do need some assistance on a daily basis. Their children are running back and forth helping to provide care but it is just too difficult to do on a long term basis. The plan is to move them to an assisted living facility. The problem, however, is that they have limited funds to pay for that care. While they intend to sell the home, that won’t happen overnight.
An option that has worked well in the past is to take a home equity line of credit and use it to pay the monthly assisted living fee and real estate taxes, insurance and maintenance until the home is sold. Except, in today’s economy with the financial industry itself being bailed out, banks are no longer approving these loans, concerned about the creditworthiness of borrowers and the risk of default. So what now?
It may be time to look at a reverse mortgage. Increasingly, this is the only option for seniors. The concern about defaulting loans is not an issue because, by its terms, a reverse mortgage won’t be repaid until the borrower dies or sells the home. The ability of the borrower to repay isn’t a factor because he/she makes no monthly payments. Hence the term “reverse”.
Over the years I have seen cases where reverse mortgages have enabled seniors to stay in homes they really couldn’t afford any longer and probably should have sold. If they outlive the funds borrowed, typically they are in poor health and now have exhausted their assets completely. It is also true that these loans carry higher transactional fees than traditional mortgages.
However, here, the plan is to sell the home as soon as possible to pay for the next level of care, not hang on too long. And, if a traditional mortgage isn’t an option any longer, the higher fees become acceptable given the alternative of the children taking money from their own savings to pay the cost of Mom and Dad’s care. With an economy in recession and unemployment rates at their highest in a generation many children don’t have the funds to pay for their parents’ long term care.
That’s why for many, it may be time to take a closer look at the reverse mortgage.
For further information and advice in any elder law matter, do not hesitate to contact me at 855-376-5291, or email fniemann@hnlawfirm.com.
Fredrick P. Niemann, Esq., an Elder Law Attorney