If you want to be comprehensively prepared for the future you can’t overlook things that you may not be especially anxious to think about. There are those who cross their fingers, stick their heads in the sand, and hope for the best, but these are the people who find themselves totally unprepared for contingencies that arise. Making prudent preparations for things that may or may not happen is wise because these advance plans will be welcome should they be needed, and if they are not all the better.
One of the things to think about when you’re looking forward is the possibility of a stay in a long-term care facility or the need for in-home care. Statistics compiled by the United States Department of Health and Human Services tell us that seven out of every 10 senior citizens will someday need some form of long-term care. So this is something that is relevant to all of us, and using current figures a typical stay in a nursing home may run you in excess of $200,000. This is a lot of money for many people so it is wise to be aware of all of your options.
Some people address long-term care costs by taking out a home equity conversion mortgage. These are federally backed reverse mortgages that make payments to you in return for equity in your home. The loan becomes due after you move from the home or pass away.
You could choose to take out a home equity conversion mortgage and use the money that you receive to pay for in-home care. If you’re able to stay at home throughout your life, when you pass away the loan will become due. At this time your heirs could choose to sell the house, pay off the loan balance, and keep any remainder that may exist. It should be mentioned that they’re not required to sell the home. The loan must simply be satisfied, and this can be done utilizing any source of funding that may be available to the responsible party.
Another option would be to use the funds derived from the HECM to pay for long-term care insurance. If you do need to move into a long-term care facility your coverage will pick up the costs. You could then sell the home, pay off the loan, and pocket the amount that remains.