Perhaps you’re at the point in your life when you or your spouse decides to move into a care home. But you don’t want to sell your house. This could be because your spouse or child lives there or you have renters. When looking for ways to pay for the cost of moving into a residential care home or assisted living, it may be tempting to explore options like a reverse mortgage. How much is this going to cost?
How Much Does a Care Home Cost?
The national average monthly cost for living in an assisted living facility is $4,500 according to Genworth’s Cost of Care Survey. And expect to pay out of pocket; residential care is not covered under original Medicare. (Most people believe it is, sadly.) When you factor in inflation, that monthly cost will only go up. Many care homes have a move-in fee, recurring monthly fees like rent, and a la carte services depending upon the resident’s level of independence.
“A resident who doesn’t require any specialized care can expect to pay less than someone who needs verbal instructions, reminders, or assistance with activities of daily living such as bathing, toileting or dressing.” Caring.com
As you start your research on which care home is best, it’s important to determine your budget. Nursing homes, which are not residential care homes, are much more expensive because of the extensive medical care required at skilled nursing facilities. Be sure to search for places that self describe as assisted living, care homes, or residential care facilities.
What is a Reverse Mortage?
A reverse mortgage is a mortgage that allows a consumer to borrow up to 70% of their home’s value as tax-free income to pay for long-term care. The loan has to be repaid when you die or move out. So, that’s something to think about if there is a surviving spouse. There are age restrictions, of course, and there are also programs through HUD. It’s a bit more complicated than just signing on a dotted line. Talking to your financial planner is advised.
“The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through an FHA-approved lender. The HECM is FHA’s reverse mortgage program that enables you to withdraw a portion of your home’s equity.” US Dept of Housing and Urban Development
Can You Use Funds From a Reverse Mortgage to Pay for a Care Home?
Yes, you can use funds from a reverse mortgage to pay for your care home costs. You can use the reverse mortgage to pay for anything you like. However, the fees are high and you will be required to meet with a reverse mortgage counselor.
Also, if you move out for twelve consecutive months and your spouse living with you isn’t a co-borrower, the loan will have to be paid in full. This usually means the sale of the house and your spouse will have to move as well. If this sounds like you, it may be that a home equity line of credit is a better way to go. Always talk to your mortgage broker or financial planner of choice first.
“If your spouse or partner is not a co-borrower and you move someplace else for the majority of the year, the reverse mortgage loan will need to be paid back. The most common way to pay back a reverse mortgage is by selling the home, in which case your spouse or partner will have to move.” ConsumerFinance.gov