How a HECM can Impact Your Healthcare
Healthcare becomes an increasingly important issue as you age. As retirement approaches, planning ahead to deal with declining health—and more specifically—the costs involved, can make or break the financial stability that most of us aim for at the end of our careers.
One tool that older homeowners have at their disposal to meet the financial demands of retirement, including healthcare, is a Home Equity Conversion Mortgage (HECM). Commonly called a reverse mortgage, these loans allow homeowners over the age of 62 to access the equity in their homes while still living there. Payments on these loans don’t come due until the borrower passes away or the home is no longer their primary residence.
The flexibility of a HECM makes it a particularly useful option in retirement planning. The additional source of funds can be used to address an unexpected change in your healthcare needs. Or, because a HECM will not impact your Medicare eligibility, it can become part of a comprehensive, long-term plan to effectively manage future healthcare challenges.
Fill in the Gaps
A reverse mortgage loan is often disbursed as either a lump-sum payment or as monthly payments over a fixed timeframe. Those seeking financial options during a health crisis might consider proactively establishing a HECM line of credit. There is no obligation to access the funds if they aren’t needed, and the amount available typically grows at a predetermined rate as the borrower ages, regardless of any fluctuations in the home’s value.
Having loan proceeds available when you need them could also help cover expenses that your health insurance may not. For example, Medicare may cover part-time, in-home nursing care or physical therapy, but it won’t pay for 24-hour in-home care, meals, personal services such as housekeeping, or non-medical personal care like bathing and dressing.
Without the funds to pay for those additional costs or loved ones to assist, a health emergency could require you to relocate to a skilled nursing facility sooner than you would like.
Time to Transition
Regardless of how a borrower decides to receive their funds from a reverse mortgage, a HECM could ultimately function as a financial supplement, supporting a more comfortable transition into long-term care.
Some borrowers also use reverse mortgages to pay for home improvements. Upgrades such as flooring, walk-in showers, grab bars, and stairlifts can increase mobility and safety, prolonging the time that an aging homeowner can remain in their home.
Lastly, consider a HECM for Purchase if you’re over 62 and looking to relocate to a more appropriate property, or to an area closer to family members who can provide support while recovering from a health scare. This option applies the perks and regulations of a reverse mortgage to loans used to purchase a new home, potentially helping reduce your long-term costs and providing the added benefit of access to more retirement funds.
If retirement has arrived or will be here soon, consider speaking with an experienced member of the Open Mortgage team to discuss your reverse mortgage options. It may be just the tool to make your future more secure. Visit OpenMortage.com for details.
- At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
- Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
- The loan balance grows over time and interest is charged on the outstanding balance
- The borrower remains responsible for property taxes, hazard insurance, and home maintenance, and failure to pay these amounts may result in the loss of the home
- Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment