Help Protect Your Home with a Reverse Mortgage

For many senior homeowners the prospect of living an ever longer life only gets better with each new advancement in the science of medicine. But, these medical “miracles” don’t come cheap and the rising costs of institutional healthcare exceed even the most aggressive estimates of inflation. The average daily costs associated with a professional nursing-care facility are well over $200 and will quickly deplete the savings of even the most frugal. Long-term care insurance is one way an individual can provide varying levels of asset protection, but this scenario has two distinct problems – one must be healthy enough to qualify for the insurance and if so, then be capable of paying for it.

Reverse mortgages are loan programs specifically designed for senior homeowners - 62+years old. Monies from a reverse mortgage can be withdrawn, tax-free, in three different ways: as a lump-sum, as a line of credit or as a monthly distribution. While all three options will generate a mortgage lien equal to the total available funds, the latter two options provide the homeowner with the benefits of a monetary resource without the liabilities that can be associated with a liquid asset. These loan proceeds can be used to pay the premiums for Long-term Care Insurance and/or Life Insurance Policies – if the borrower qualifies for them. But for others, a reverse mortgage loan may be the only means by which a senior can help protect a significant portion of the equity in his or her home from creditors. The use of trusts, gifts and LLC’s (to name a few) are all worth their weight in gold if established timely, but the funding of these can be an issue.

Long-term care insurance is purchased on the basis of the value of total benefits to be provided. Through the Connecticut Long-term Care Partnership program, the amount of Medicaid asset protection is equal to the value of total benefits purchased. Unless an individual purchases Lifetime Long-term Care insurance policy, once the benefits are exhausted, the healthcare provider/servicer is going to look to other assets for their remuneration. When a creditor assesses the net worth of an individual, liquidity is not an issue (except to ascertain an order of potential asset liquidation). Investments, savings, and homes are all within the creditors’ reach, unless the “legal protection” of these assets has been addressed well in advance.

A reverse mortgage loan requires no monthly repayment of interest or principal, although there are no penalties for doing so. If a senior homeowner chooses to repay any portion of the interest accruing against their borrowed funds, the payment of this interest may be deductible just as any mortgage interest may be. In effect, a reverse mortgage can be considered an interest-only loan for its entire term (unlike a typical Home Equity Loan which has a limited interest-only period [9 years, 10 months in CT], followed by mandatory amortization [typically 20 years] to maturity). A reverse mortgage loan will be available to a senior homeowner to draw upon for as long as they live in their home. And, in most cases, the lender increases the total amount of the line of credit over time (unlike a traditional Home Equity Line whose credit limit is established at origination). If a senior homeowner stays in the property until they pass away, his or her estate valuation will be reduced by the amount of the debt.

A reverse mortgage is simply a lien against a primary residence. It does not require the senior homeowner to relinquish title to the property. Reverse mortgages can be established within revocable trusts and Life Estates. When utilized effectively, a reverse mortgage can help a senior homeowner meet their current needs and strengthen their financial future.

If you feel you would benefit from a closer look at how a reverse mortgage could work for you, please contact Stephen V. Lamoreaux, Reverse Mortgage Specialist -
(203) 595-9610 or (800) 562-6365x376 or via email – steve@dmlmortgage.com