More Information About Reverse Mortgages

Study Shows Reverse Mortgages Can Help Seniors Pay for Long Term Care at Home

Washington—The National Council on the Aging (NCOA), with the support of the National Reverse Mortgage Lenders Association, has published a report showing that reverse mortgages can help an estimated 13.2 million elderly homeowners pay for long-term care, allowing many to remain independent in their homes longer.

Of the 13.2 million eligible households, an estimated 9.8 million currently have an impairment that can make it hard to live at home, according to the study, titled Use Your Home to Stay at Home: Expanding the Use of Reverse Mortgages to Pay for Long Term Care.

In total, these households could access as much as $695 billion through reverse mortgages. For individuals, the extra cash could go a long way to help with family caregiving and other long-term care expenses.

For example, a borrower aged 75 years old with a home worth $100,000 could receive a reverse mortgage that could pay a family caregiver $500 a month for almost 12 years, $1,120 a month in adult day care services for almost five years, or $2,160 a month in home care—daily care for at least four hours—for 2.5 years.

“The study shows that reverse mortgages have significant potential to help seniors pay for home healthcare services or to make home modifications that make independent living possible,” said NRMLA President Peter Bell.

NRMLA acted as an advisor to NCOA. The publication of the report is the first of a multi-phased project focused on educating policymakers, the healthcare industry, the aging community, and others about the potential use of reverse mortgages to help reform America's long-term care financing policies.

The report, funded by the Centers for Medicare and Medicaid Services and the Robert Wood Johnson Foundation, also shows how reverse mortgages can lessen financial pressure not only on individuals and families, but also on state Medicaid programs and the federal government.

NCOA projected annual Medicaid cost savings of $3.34 billion nationwide by 2010 assuming four percent of America's eligible seniors used a reverse mortgage to pay for healthcare services, or if one in four used a reverse mortgage, $4.86 billion would be saved.

A reverse mortgage is a loan that enables homeowners 62 or older to borrow against the equity in their home, without having to sell their home, give up title, or take on a new monthly mortgage payment. The loan proceeds can be used for any purpose, and taken out as a lump sum payment, fixed monthly payment, line of credit (except in Texas), or a combination. The loan amount depends on the borrower’s age, current interest rates, and the value and location of their home. A reverse mortgage isn’t repaid until the borrower moves out of the home permanently, and the repayment amount can’t exceed the value of the home. After the loan is repaid, any remaining equity is distributed to the borrower or borrower’s heirs/estate.