subject: The Benefits Of Reverse Mortgages For The Elderly [print this page] An older person who has very low income and few assets may qualify for Medicaid, which may pay for the entire cost of home care. Or an elderly person may have a long-term care policy that will pay for a portion of their home care costs. However, many older people are caught in the middle when it comes to paying for their long-term care later in life. They have no long-term care insurance coverage and they do not have enough income or assets to pay for the care themselves, but they do not qualify for Medicaid coverage.
Many of these people stuck in the middle do own their own homes outright or have considerable equity in them. But using a reverse mortgage, elderly people can convert their home equity in to cash while still living in their home as long as they are physically able to. A reverse mortgage is a loan against the value of the home paid in one lump sum, monthly amount, line of credit or other combination, which does not have to be repaid until the borrower sells or otherwise permanently leaves the home.
Reverse mortgages also have a side benefit. Because the money is a loan, it is not taxable income, nor does it count as income against Social Security benefits if you havent reached the full retirement age. However the interest you accumulate on the loan is not tax deductible until you pay off the loan.
When your aging parent sells the home, he or she must pay back the loan out of the proceeds. If the borrower permanently leaves the home, moves in with relatives, to a nursing home or other location, or dies, the lender must be repaid within a certain time. This often means that the home will have to be sold by the borrower or the estate to repay the reverse mortgage.
If the property is sold for more than the amount of the mortgage, then the owner or the owners survivors keep the difference. On the other hand, if the property is sold for less than the amount that was given through the reverse mortgage, neither the borrower or their survivors owe the mortgage company anything more. The mortgage company has to take the loss.
It is very important that before utilizing any type of financial tool or loan that you do your own research and seek an independent professional's advice that has your best interests in mind.
