Most people are completely unprepared to pay for any costs associated with “care-giving” because it never occurred to them that at some point in the future they may very, well need help as they age.
And unfortunately if you haven’t purchased a LTC policy by the time you are in your 50’s, the premium will be very expensive later on, especially if you have developed some health issues and qualifying for the insurance will now be difficult and or too expensive to obtain.
Everyday a senior experiences either a fall, a stroke or a medical procedure that will require nursing and help of some sort within the home and since few people have purchased Long Term Care Insurance, they and their family will find themselves in a crisis to come up with a solution.
If the senior has a substantial amount of money they have saved over the years, they could use it to pay for their care but if they don’t then maybe it will be the adult children who will have to use their own funds to cover the expenses associated with hiring a service to take care of the family member who needs it.
And a very frightening fact is that 70% of those who are 65 or older will have some sort of situation happen where they are going to need help and they won’t have any way to pay for it.
Typically it becomes the responsibility of a family member and the burden of that responsibility is extremely difficult as it up ends the family dynamic, the caregiver is unqualified to care for the parent and their own life becomes overwhelmed and in some cases, they develop serious health issues of their own due to the ongoing stress of being a caregiver.
An excellent option for the entire family is to use funds from a Reverse loan to pay the costs, plus any cash reserves the senior and their family may have, will be protected from being drawn down and the real fear of running out of money is eliminated.
I have found that more Financial Advisors are suggesting this alternative to their clients and families in lieu of drawing down on their investments and possibly experiencing tax consequences and it is an excellent solution to use to pay for the care-giving expenses and removes the fear and stress a family is experiencing when they don’t have the funds to pay for the services that are needed for the family member.
Funds from a Reverse loan is an excellent option to consider to cover these costs and relieve the worry and burden the senior and their family.
FHA increased their Lending Limits effective as of January 2nd. 2017 for all of the loan programs that they offer. This includes Reverse Loans otherwise referred to sometimes as HECM/Home Equity Conversion Mortgage.
The increase wasn’t huge but it certainly could make a difference for some seniors who wish to pay off an existing loan that has a high balance and take advantage of more of their property’s value to achieve this, because the new limits will bump them up for the Principal Limit ( the amount of money they are entitled to receive).
The new Lending Limit is $636,150 over the previous one of $625,500.
What this means to a potential borrower is the possibility of a bit more funds at the close of escrow, especially if they were short to pay off an existing large mortgage.
The other area of change, is how seniors are using the funds from a Reverse loan.
I have found that more of my clients are putting a Reverse Loan Line of Credit in place to avoid drawing down on any investment portfolio that they may have and by doing so, extend the longevity of their investments and avoid any tax consequences.
And many seniors are quite concerned about the possibility of out living their money and how to pay unforeseen medical expenses as they age. By having a Line of Credit in place, it gives them another option to be used for unplanned expenses such as “care-giving” and other expenses associated with aging.
And it’s important to understand the following:
- The property remains in the estate and transfers to the heirs when the last borrower passes away
- The Title remains in the name of the borrowers or their Trust
- There are no mortgage payments, but property taxes and Homeowners insurance must continued to be paid by the borrower(s)
- There are “No Costs” Reverse Mortgages available
- Sell current property and buy down to a smaller property using a Purchase Reverse loan.
My previous two posts share information from a study that was completed this year by the Harris Poll for Northwestern Mutual to investigate how many Americans will be prepared to retire and what are their concerns about the possibility of outliving their funds?
Social Security provides an iota of money each month to seniors but certainly not enough to pay ongoing cost of living expenses, medical expenses or caregiving costs and if the senior doesn’t have a pension or other funds to use, what are they going to do?
New Study Underscores Retirees’ Need for Non-Traditional Funding Sources
Posted By Jason Oliva On June 7, 2016 @ 5:32 pm In News,Retirement,Reverse Mortgage
“Non-retirees also plan to rely upon Social Security less than their retired counterparts, with 35% of non-retired Americans expecting this benefit will be their sole or primary source of retirement income, compared to 49% of current retirees.
Social Security is often one of the main sources of income for people over age 65. But this stalwart asset, which has long been considered one of the three legs of the traditional retirement stool, may soon face depletion by 2034, according to the Security Board of Trustees for the Social Security Administration in a report submitted to Congress last summer.
But while there has been some talk that reverse mortgages could support the traditional retirement stool, joining Social Security and personal savings as defined benefit pensions become increasingly less common, the acceptance of using housing wealth as a retirement funding source is hobbled by a widespread apprehension to borrow against home equity.”
American seniors currently retain over 12 trillion dollars in home equity and honestly? In spite of the fear and misunderstanding of the Reverse loan, it will come to the rescue for many seniors and their families.
They are now affordable, even a No Costs version is available, non taxable because it’s not income, they continue to own their home, it never goes to the “Bank” and its very, very safe.
But then again, I am a Reverse Loan Consultant…..