Staying Home… Can You Afford It?
By Nancy R. Larson, Attorney
Joan lived with her mother Betty in the family home
for many years, combining their limited income to pay household expenses. Several years after Betty’s death, Joan’s
advanced arthritis became debilitating.
The cost of paying for the help she needed to stay at home exceeded her
limited income.
How can seniors afford to stay at home when their biggest
asset is their house? With no long term
care insurance for many seniors, their main available asset is the house, which
is often owned free of debt.
A
home equity loan may be a good way to obtain access to the equity that has
built up in a home. A home that has no
mortgage and has been owned for a period of time may have a value that has increased
over the years. It might, however, be
difficult for a senior on a fixed income to qualify for financing.
Another
option for such seniors is the reverse mortgage. A reverse mortgage is available to homeowners
who are at least 62 years of age. It is
a loan against the senior’s equity in the home and provides for tax free
advances against the equity, requiring no monthly payments during the term of
the loan.
A
reverse mortgage provides either a fixed monthly payment to the homeowner or a
lump sum. The proceeds from a reverse
mortgage can be used within the discretion of the homeowner. In Joan’s case, a reverse mortgage could be
used to pay for personal assistance in the home, medical bills, prescriptions
and living expenses, estate planning and other needs.
Although
terms of a reverse mortgage may vary from one institution to another, the loan
is usually not payable until the last surviving mortgagor sells the house,
moves out permanently, or dies.
The
amount of the loan depends on the fair market value of the house, current
interest rates and the age of the senior.
On the down side, the lender may require a home inspection and
compliance with local code requirements which may be costly and cumbersome.
Planning
ahead to determine how you will finance your living expenses may make staying
in your home more affordable than you think.
* Joan is a fictional person but represents a typical
situation.
Nancy R. Larson is an attorney with offices in