Senior Housing Is Expensive—A Reverse Mortgage Could Help
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For most people, the retirement dream consists of independence, relaxation, and enjoyment of free time. And for many, that dream is well within reach. But as retirement continues on, old age may begin to take its toll. Eventually, you may find yourself needing help with certain things like cooking or cleaning, or that you or your spouse needs help with taking medication, bathing, or simply getting around.
The good news: there are several common senior housing options for individuals and couples who find themselves in need of assistance. Independent Living, Assisted Living, and Memory Care are all rising in popularity as the aging population increases. Communities that provide these different housing types can help with activities of daily living such as cooking, or with higher levels of care, such as medication management. They also typically include transportation, activities, wellness programs, and more.
The bad news: they can be quite expensive and the costs are rising. In fact, the average annual price per unit rose by $1,200 in 2015 versus 2014, according to national senior living referral service A Place For Mom. Regionally, southern and western states face the fastest acceleration in cost growth compared to other U.S. regions, APFM found based on its survey of actual rents paid across senior living communities nationwide.
Nationally, the average cost of independent living is $2,700 per month, according to the findings. For assisted living, the average price per month is $3,900 and for memory care, which requires more care expertise, that figure is $5,100. If you happen to live in the Northeast, the average is even higher.
But while these costs may seem daunting, there are some ways put them off altogether. A reverse mortgage can help if you are facing the need for more care as you age.
Delaying a Move
Some households choose to delay the move to senior housing with the use of a reverse mortgage. This type of loan allows borrowers who are 62 or older to live in their home while receiving payments from it, or access their home equity as a line of credit.
For individuals who require care in their homes, such as help with activities of daily living, those borrowers may use the reverse mortgage proceeds to pay for in-home care. Like senior housing, this care comes in a few different forms. Some providers offer help with activities such as bathing and housekeeping; others are certified to provide health care services such as administering medication, or injections. Depending on the type of care you need, the costs can be much less in comparison to a move into senior housing.
Moving to a Home That’s More Suitable
A specific type of reverse mortgage, the Home Equity Conversion Mortgage for Purchase, or “HECM” for Purchase, allows borrowers to purchase a new home and get a reverse mortgage in a single transaction. For an individual or a couple that no longer wants to worry about stairs, or needs single-story access due to a wheelchair, a HECM for purchase allows borrowers to purchase a new home while eliminating mortgage payments.
This may extend independence by providing for a home that is more suitable, while also tapping into home equity for home care or other related costs. The HECM for purchase can also allow for a move closer to family caregivers who will provide the care at no cost, once again helping to delay a move into senior housing and keep costs low.
A Place for Mom found that home prices are rising faster than senior housing costs, which could be another reason to delay a move into senior housing. A reverse mortgage loan amount is based on the appraised value of the borrower’s home, but any leftover home equity after the loan is repaid goes back to the borrower or to the borrower’s heirs.