Using Home Equity or a Reverse Mortgage to Pay for Memory Care
How do you pay for memory care?
Aging is expensive in America. The cost of living without a salary along with medical care and other costs adds up. Because of this, investors recommend you have ten times your annual income saved up by age 67.
But even if you have an impressive 401(k), some senior living costs, such as memory care, come at a high price – close to $7,000 per month – due to the specialization of care.
This number might sound scary, but just because you don’t have the cash on hand for memory care, doesn’t mean you can’t afford it. Creative financial solutions exist for senior care, including using the equity in your home to pay for the added or unexpected costs.
A reverse mortgage or home equity line of credit (HELOC) could be a viable solution for you if you’re saving for assisted living or memory care in the future, or if you or your loved one needs it now.
What is a reverse mortgage?
A reverse mortgage is a cash loan in which you receive monthly payments from a lender based on the percentage of the value of your home.
This is not selling your home to the bank. You continue to own your home until you sell it, the last owner has been moved out for over a year, or the last owner passes away. In this case, the lender will typically sell the home to pay back your loan plus interest. Any additional profits are yours to keep.
There are several types of reverse mortgages available, but the Home Equity Conversion Mortgage is the only type that assists in elder care. These loans are available through a lender that has been approved by the Federal Housing Administration.
To find an FHA-qualified lender, click here.
What else should I know about a reverse mortgage?
Is a reverse mortgage right for me?
A reverse mortgage is a good option for those who don’t need long-term care right away but need funds for long-term care insurance or to make renovations to your home to make it more accessible and safer as you age.
If your spouse needs to move into a memory care facility or assisted living facility soon, a reverse mortgage is also good option, as you will be staying in the house while your spouse receives care, and you can use to loan to fund his or her care needs.
If you or your spouse needs full-time care but you want to continue living at home, a reverse mortgage could help cover the cost of a family member or professional at-home caretaker.
What is a HELOC?
A HELOC is a line of credit you take out against the value of your home. This isn’t a lump sum loan but works more like a credit card. You will receive a credit card, debit card or checkbook with a HELOC.
With a HELOC, you will be given a draw period — a period of time when you can draw funds on an as-needed basis based on your credit limit. This period typically lasts 10 years in which you will make minimum monthly payments.
After the draw period concludes, you usually have a set amount of time to repay the loan, though some HELOCs require repayment immediately.
What else should I know about a HELOC?
So, how do you pay for memory care?
When considering how you will pay for memory care costs or other elder care costs, talk to a professional about whether a reverse mortgage or HELOC is right for you. A financial planner or someone who specializes in using home equity to pay for senior living costs, such as Kevin Neufeld (770-356-3287) of Fairway Independent Mortgage Corporation can answer your questions on what makes the most financial sense for you and your family.