Long-Term Care Insurance Combined With Reverse Mortgages

By Terry Stanfield

Many retirees are faced with the possibility of a long-term care event. How will I pay expenses if I cannot take care of myself? I do not want to put the burden of long-term care expenses on my family or children. The good news is that we are not alone, millions of seniors across America are facing the same dilemma and many are making plans now. There are a lot of things we can do but it is coming down to two main options. The first is long-term care insurance and the other is a reverse mortgage. Some are combining both options. These options are important factors in planning for the time when we may need the money the most but will not be able to do much about it.

A reverse mortgage is a loan that is made to individuals 62 years and over in the United States, which is used to release home equity on a property in one large lump sum, or multiple payments. The homeowner is not obligated to repay the loan until they die, the home is sold or they leave into a nursing home.

For a typical mortgage, the owner of the house will pay a monthly payment to the lender, whereas in a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. Now, it may seem odd that there are no payments on the reverse mortgage, but the way that the loan is paid off is that if the home owner moves, goes into a nursing home or dies, is from the proceeds in the sale of the house, or in the event the heirs refinance the estate of the homeowner. If the proceeds of the sale exceed the amount of the loan, the owner of the house gets the difference. In the case of the heirs, they would receive the difference. If the sale does not pay off the loan, then the bank will absorb the difference.

This option is becoming very popular with some seniors when they have to choose between reverse mortgages and long-term care insurance because they get a lot of the money upfront, which can then be applied to savings. The draw back is that it could severely effect the inheritance that you may want to leave behind. Long-term care insurance is an inexpensive way to insure that your family is taken care of.

Conclusion For many seniors, the possibility of their children paying out of their own pocket to take care of them is simply too much to bear. As a result, seniors will look at the options of reverse mortgages and long-term care insurance to find a way that they can pay their own way through either a loan or a government program. In the case of reverse mortgages, they will be able to get a loan that they will not have to pay back until they die or move, and even then the loan is paid off on the sale of the home. This allows them to get the money up front to help pay for their own long-term care at home. It is of little surprise it has become such a popular trend for seniors looking for a way to pay their own way.

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