Reverse Mortgage and Planning for the Future

Parent-care can throw a family’s carefully-planned finances into a tailspin. Adult children who thought that their parents had the resources to manage the Golden Years of their lives suddenly find that they must step up to cover their parents’ needs. When parents are living in their own home but need extra help, supervision and nursing assistance the financial strain can seem daunting.

Seniors often make huge sacrifices for their children’s and grandchildren’s welfare, but many don’t forsee the complications that parent-care will present for their families. The time to plan for such an eventuality is before a crisis hits.

Two available options can be combined to provide the needed funds for nursing care or senior care. Seniors who have life insurance policies can convert their life insurance policy to a long-term care policy. Individuals aged 61 or older who have a chronic or terminal medical condition can use their policy to pay for their care. This involves no waiting period and the insurance policy converts to provide the family with a cash payout to be used for the senior’s care.

To ensure that this resource is a viable option, the couple can take out a Reverse Mortgage. This mortgage option, insured by the Federal Housing Administration (FHA) allows seniors aged 62 or older take out a Home Equity Conversion Mortgage (HECM) which, in effect, mortgages their home to the lending institution. The regulations of a HECM allow the borrowing individual or couple (if both partners are 62 or older) to remain in their home while receiving monthly payments from the lending institution against the value of their home.

These payments often provide the seniors with the extra funds needed to make payments on an existing or new life insurance or long-term care insurance policy, ensuring their continued care in their home as they age.

The procedure is simple. The senior, together with a spouse, partner or any other individuals who are listed on the home’s deed, meet with a representative of a HECM lending institution to ascertain the terms and conditions of the loan. The lending institution will provide the borrower(s) with an estimate of the worth of the Reverse Mortgage, which the individuals can obtain through a one-time cash payment, a line of credit or monthly payments.

After a meeting with a certified counselor who provides additional information about the loan’s terms and conditions, the borrowers sign for the Reverse Mortgage. The loan enables the borrowers to make the plans that will enable them to remain in their home for as long as possible, easing their worries and the concerns of their loved-ones.