Someone turning 65 has nearly a 7-in-10 chance of needing long-term care in the future, but don't have the savings to manage the cost of assisted living. One way to help pay for it is grabbing a reverse mortgage and using the equity in their mortgage-free home.What is a reverse mortgage?
If you have at least 50% to 55% equity in your home, you have a good chance of qualifying. How much you can access depends on your age and the home's appraised value. You must keep paying taxes and insurance on the home, and the loan is repaid when the borrower dies or moves out. One limitation: a reverse mortgage requires that you live in the home. If you're the sole borrower of a reverse mortgage and you have to move to a care facility for a year or longer, you'll be in violation of the loan requirements and must repay the loan.
But for home health care or paying for a second borrower who's in a nursing home, a reverse mortgage can help bridge the gap. Using home equity through the reverse mortgage is a different option as opposed to pulling money from an individual investment account, said Dennis Nolte, a certified financial planner in Florida.Your home is generally one of your biggest assets, and using its value to handle long-term care costs can make sense.