As a senior care professional, you know Medicare provides only limited in-home medical coverage for your patients. It may provide in-home skilled nursing or physical therapy, but it generally won’t cover custodial care. Even if your patients have a supplemental Medicare plan, it will likely not be enough. Using a HECM to fund their home care, however, could fill those coverage gaps— and possibly a great deal more.
What’s a HECM?
HECM stands for Home Equity Conversion Mortgage. It is a reverse mortgage backed by the U.S. government.
What does a HECM Do?
A HECM loan is designed exclusively to help older Americans convert some of their built-up home equity into tax-free cash so they can be more financially secure in their retirement. As for helping your patients, they could use that tax-free cash to meet their in-home health care expenses.
Does a HECM affect government benefits?
The payout does not impact Social Security, Medicare or pension benefits. Need-based benefits, such as Medicaid or SSI, may be affected because proceeds from a reverse mortgage improve monthly cash flow. (Borrowers should consult their benefit agency.)
Who can qualify for a HECM loan?
To qualify for a HECM, the borrower must:
- Be at least 62 years old (a non-borrowing spouse may be younger)
- Own their home
- Live in the home as their primary residence
- Have substantial home equity (current mortgage does not have to be paid off)
Does a HECM offer different payout options?
There are a variety of HECM payout options that in-home care recipients can customize for their needs, but the most popular choice is a HECM line of credit, which is particularly well suited for meeting in-home care expenses.
Unlike a traditional HELOC, a HECM line of credit can’t be revoked, reduced or frozen so long as borrowers honor their loan terms, which include maintaining the home and paying property taxes and homeowners insurance. Borrowers also do not have to pay periodic fees or charges to keep the line open.
Furthermore, borrowers pay interest only on the portion of the line of credit they use. Meanwhile, the portion of the line they don’t use continues to grow, giving them an even greater health safety net should their health needs change over time.
Specifically, how can a HECM help those in my care?
According to the Home Care Association of America (HCAOA), 9 out of 10 Americans, 65 and older, want to stay home for as long as possible, and 80% think their current home is where they will always live.1
Living at home, or choosing to convalesce at home, isn’t just a desire based on sentimental reasons. Numerous studies have shown aging in place provides increased health and emotional benefits over institutional care.2 Other studies have shown that when medical care takes place at home, residents require 25% fewer doctor visits.3
Interestingly, many residents in need of care often assume a family member will be able to step in and provide the care they need, but on average, adults aged 60+ with one or more children live more than 280 miles from their nearest child.4
Finally, what should not be overlooked in your discussion is that a HECM can help older Americans continue living in the home they love. Of course, the right to remain in the home is contingent on complying with the terms of the loan. Their HECM will also pay off their existing mortgage, which should immediately boost their cash flow. That will not only help pay for in-home care expenses, but expenses to make the home safer and more accommodating.
Use the best tools for your practice
As a senior care professional, you no doubt rely on a variety of medical tools and aids to provide the best care for your patients. In the same way, by showing those in your care some of the financial tools available to them, like a HECM, you can keep the focus on what matters most, their health and well-being.
We hope this article has given you some help with things to think about. Of course, every situation is different. This information is intended to be general and educational in nature, and should not be construed as financial advice.
SOURCES
1http://www.hcaoa.org/uploads/1/3/3/0/133041104/value_of_home_care_secured.pdf
2https://www.huduser.gov/portal/periodicals/em/fall13/highlight2.html
3https://www.hcaoa.org/uploads/1/3/3/0/133041104/value_of_home_care___secured.pdf
4https://www.hcaoa.org/uploads/1/3/3/0/133041104/value_of_home_care___secured.pdf
