Reverse Mortgage So Seniors Can Age In Place
In a survey of 1,000 respondents aged 55 or older, 89% of respondents said they wished to age in place in their own homes as opposed to seeking out more traditional senior living arrangements outside the home. However, despite the overwhelming preference, only 34% of respondents said it would be feasible to pay for required home modifications to make aging in place easier.
One respondent to the survey described their motivation for wanting to remain in their home:
“I will stay here as long as physically possible, and if there is an issue I will be concerned at that time.” The main issue with this point of view is that waiting for issues to occur instead of planning ahead could very easily leave you without time or money to make necessary modifications to your home.
Can't Afford It?
You might think that you can't afford to make modifications to your home instead of selling and moving into and assisted living facility. Data shows that the cost of senior housing and care facilities has been rising, with a median annual cost of $54,000 for an assisted living facility in the U.S. in 2021. If you wanted to stay in your existing home and make necessary modifications, you may want to consider a Reverse Mortgage. Reverse Mortgages allow seniors to withdraw a portion of their home's equity to use for home maintenance, repairs, or general living expenses so they may reside in their homes indefinitely as long as property taxes and homeowner's insurance are kept current.
Benefits Of A Reverse Mortgage
1. Use Your Already Earned Equity
Many seniors struggle because they don’t have a reliable source of ongoing income. As a result, some may feel that delaying retirement is their only option.
However, with a reverse mortgage, retirement can be more financially feasible. Money from a reverse mortgage can become a reliable source of monthly income. Essentially, it allows an illiquid asset – your home’s value and equity – to become liquid.
2. There’s No Initial Tax Liability
When you get a reverse mortgage, payments from it aren’t treated as income by the IRS or state tax authorities. Instead, the cash is classified as a loan advance. In turn, that makes the money effectively tax-free at the time. Taxes usually only become part of the equation if you sell the property. At that point, you might owe taxes based on capital gains. However, that isn’t universally the case; whether capital gains are triggered or not depends on the initial purchase price of the property, the value at the time of the sale, and whether your reverse mortgage creates a balance that exceeds the house’s value.
You may also qualify for a limited tax deduction based on interest you paid. However, there are restrictions, as you’re usually only eligible if you use the funds for specific home improvements or other select activities.
3. You Can Stay in Your Home
With a reverse mortgage, you get to remain in your home indefinitely as long as it serves as your primary residence. As a result, regardless of the balance you accrue on your reverse mortgage, forcing you to leave isn’t an option for the reverse mortgage lender. Instead, you’re allowed to remain, regardless of the balance – including if it exceeds your home’s value or available equity amount – as long as you meet the requirements for keeping it as a primary residence.
Additionally, you always have the option of paying off the balance at a time of your choosing. By doing so, the lender no longer has a stake in the property, so you can keep the house regardless of whether it remains your primary residence.
Ultimately, staying in your home is generally an option if you use a reverse mortgage, barring some exceptions.
The most important thing to keep in mind is that if you want to stay at home, you need to start planning early before a small issue becomes a crisis. Rick Byers and Longevity Home Solutions can help. Rick took decades of experience in construction and his own experiences with his family's own changing needs and became a certified Aging In Place Specialist so he can provide his clients with solutions that will allow them to stay in their homes. Contact us today!