Given the costs of home health care and private duty care that often is paid for out-of-pocket, some home care patients find themselves strapped to pay for the care they need. Health care costs are rising each year and many times patients have limited income to help bear those costs. However, if they own their home outright or have a substantial amount of home equity, there is an option for those who are 62 and over to utilize their home as resource to help pay for their home health services.
A reverse mortgage could be a solution for certain patients struggling to pay for their home health care. There are some requirements potential borrowers must meet in order to qualify for a reverse mortgage, but first, understanding what exactly a reverse mortgage loan is all about is vital.
In a reverse mortgage loan, a homeowner can essentially receive payments from the equity they have built up while still remaining in the home and keeping the home title. The homeowner does not need to pay back the loan unless he or she moves out of the house or otherwise vacates the property for more than six months.
Another perk of a reverse mortgage loan is that it is non-recourse, which means that when the day comes that the homeowner or heirs need to pay back the loan, they do not need to pay more than the home is worth at the time of sale. Federal Housing Administration insurance helps provide this protection.
Today, home equity conversion mortgages (HECMs) are the most popular type of reverse mortgages because they are insured by the federal government.
If a patient you know has mentioned interest in a reverse mortgage, there are certain prerequisites they must meet in order to be eligible to start an application.
Some of the basic requirements are that the homeowner needs to be 62 or older, needs to be living in the home full-time and must be the owner of the property.
A complete list of reverse mortgage requirements can be found here
In recent years, there have been other requirements put into place in hopes of cutting down on the default rate of reverse mortgages.
A newer requirement is that all homeowners must go through an in-depth financial assessment before they can qualify for the loan. The financial assessment includes an analysis of the borrower’s credit and debt history including any signs of foreclosures, defaults, late mortgage payments and late payments for property charges, which can include property taxes, home insurance or homeowner’s association fees.
There is also part of the assessment that looks at the potential borrower’s cash flow and residual income, because even though the borrower’s monthly mortgage payment would be eliminated with a reverse mortgage, the borrower must keep up with his or her property taxes, insurance and other housing-related expenses.
Another aspect of reverse mortgage qualification is counseling. Reverse mortgage counseling is required by the government to make sure potential borrowers have all the information necessary to make the right decision. Counseling can take place either in person or over the phone and sessions usually take 90 minutes.
Some topics that are covered in reverse mortgage counseling include a detailed explanation of how exactly the reverse mortgage program works, the various product options, the costs associated with the process, and attention to alternative options that might be available.
To learn more about how a reverse mortgage can help pay for home health care speak to your trusted financial planner and visit http://longtermcare.gov/