Most seniors would rather continue to live independently in their home as long as possible. The second choice would be to move in with caring children or other relatives. But for a large portion of Americans, there comes a time when more is needed. In this post we’ll look at ways that a reverse mortgage can help out when age takes its toll and the medical difficulties of one spouse are too great for the other half of the couple to manage.
If you are at that point and you need in home care, temporary or permanent assisted living, or admission to a skilled nursing facility, there will be substantial and ongoing expense. Your social security, pension, and savings might not be up to the task of affording such care. But maybe the equity in your home can come to the rescue.
You could sell the home and use the equity after the sale to help with those costs. Unfortunately, this may have taxable consequences, you will lose some of the equity in real estate commissions and other costs, and you will need to pay rent to house the spouse who is still healthy.
You could borrow against the home in a regular forward mortgage, but then you will need to make a new monthly payment.
With a reverse mortgage, depending on your age and the equity in the home, you may be able to eliminate your monthly house payment, freeing up cash for the medical needs, and you might even have a lump sum amount or line of credit (LOC) to help with expenses. (Keep in mind that one spouse will need to retain residency in the home with the reverse mortgage, and all property taxes, homeowner’s insurance, and HOA dues must be paid.)
How might this work? Let’s call the couple in our story, Bob and Sue. Bob needs skilled nursing care. Sue is doing fine. They are both over 62. They need about $1000 a month on top of their other retirement income in order to afford the monthly payments for Bob’s care.
They’ve owned their home for 15 years, and it is now worth $400,000. They owe $180,000. They would be able to do a reverse mortgage. Assuming that Sue is 73 and we’ll put interest rates at 5%, they would be not only never need to make another payment on the house, saving them over $1000 a month in payments.
The rules require that at least one person who is on the title of the home must maintain their residency at the home. Sue will continue to stay at the house. But she really wants to spend a lot of her time with Bob. Here are the rules in that regard. Most contracts state:
“Principal Residence means the dwelling where the borrower shall maintain his or her permanent place of abode, and typically spends the majority of the calendar year. A person may have only one principal residence at a time. The Property shall be considered to be the Principal Residence of any Borrower who is temporarily or permanently in a health care institution as long as the property is the Principal Residence of at least one other Borrower who is not in a health care institution.”(emphasis added)
So without giving legal advice, Sue could spend a lot of time with Bob, even days or weeks at a time. The key here is that her principal residence be the home to which the reverse mortgage applies.
If you would like to discuss the details of your situation with a trained consultant who has over a decade of experience with cases very much like this one, call Brandon Webb today at 1-800-486-8786 ext. 868