With rising medical costs and the increasing cost of retirement, a lot of older Americans are looking for a way to meet these financial needs. One question that has been poised is can you use a reverse mortgage for healthcare expenses?
In author Robert Powell’s USA Today column, a reader wrote in asking whether or not it made sense to use a reverse mortgage to help pay for long term healthcare expenses. To answer appropriately, Powell looked to the experts.
One of those experts happens to be Harley Gordon, president of the Corporation for Certification for Long-Term Care, in Durham, N.C. His advice is that you can apply for a reverse mortgage and only use the funds if you need them, such as in the event of a medical emergency.
He’s not the only one who shares this mindset. The experts at the National Reverse Mortgage Lenders Association also rang in on their thoughts.
“If you take a Home Equity Conversion Mortgage (HECM) — the FHA-insured reverse mortgage — and establish a line of credit, and then only draw on it when you have in-home care expenses, the unused line of credit will continue to increase over time and you will only accumulate interest on what you have used. In some instances, this approach might make more sense than paying premiums on a long-term care policy.”
The conclusion is that when facing long term healthcare expenses, few Americans have all that many options. Whether those expenses arise from hospital visits, ongoing treatment of chronic conditions or nursing care, income, insurance, Medicaid and personal savings are the most common methods used.
This does not mean there are not any other better ways to fund your long term healthcare. Most certainly, the matter should be discussed at length with your financial advisor before you pursue any one solution.
However, a reverse mortgage line of credit is not a bad option, either. The funds are accessible whenever you need them and are borrowed against at a usually lucrative interest rate, as compared to conventional loans or other types of borrowing options. Furthermore, a reverse mortgage line of credit does not need to paid off until you are dead, making it a potentially feasible alternative to other options for long term care.