Can a Reverse Mortgage Help with Medical Expenses?

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Before the pandemic, 8.5 percent of older Americans had medical debt, and many were experiencing financial hardships.1 The worldwide Covid-19 pandemic made the financial situation even more difficult for seniors.  Unexpected medical expenses can cause stress, lead to a lower quality of life, and raise concerns about financial security, especially if older adults are on a fixed income.

Before the pandemic, 8.5 percent of older Americans had medical debt, and many were experiencing financial hardships.1 Unexpected medical expenses can cause stress, lead to a lower quality of life, and raise concerns about financial security, especially if older adults are on a fixed income.

For unplanned or unexpected medical or health care expenses, homeowners who are 62 years and may consider a reverse mortgage loan. A Home Equity Conversion Mortgage (HECM)2 is insured by the Federal Housing Administration. HECM loan allows senior homeowners to access a portion of their home’s equity into funds that can be used to pay for everyday living expenses, medical/prescription costs, cover large or unexpected expenses or set aside proceeds for an emergency fund.

How Can a Reverse Mortgage Help?

  • Eliminate Monthly Mortgage Payments3: Senior homeowners can increase their monthly cash flow by eliminating their current regular monthly mortgage payment, allowing them to focus on other financial obligations.
  • Access to a Low-Cost Line of Credit4: With an adjustable-rate HECM, there is the ability to draw from a line of credit at any time (in any amount) until the line of credit is exhausted, or let it sit and grow over time, allowing access to additional cash if the home value increases.
  • Receive Funds in a Lump Sum5: With a fixed-rate HECM, seniors have the option to receive a           portion of their home’s equity in a lump sum, often to pay for medical expenses or to consolidate debt.
  • The Ability to Age in Place6: A HECM allows seniors to age in the comfort of their homes while maintaining ownership and the title.

Interested in learning more about how a reverse mortgage can help with medical or health care expenses? Call (800) 976-6211 to speak with a licensed reverse mortgage advisor for a free, no-obligation loan assessment.

Important Disclosures

1 https://www.consumerfinance.gov/consumer-tools/educator-tools/resources-for-older-adults/data-spotlight-medical-debt-among-older-adults-before-pandemic/

2 As required by the Federal Housing Administration (FHA), you will be charged an up-front mortgage insurance premium (MIP) at closing and, over the life of the loan, you will be charged an annual MIP based on the loan balance.

Your current mortgage(s) and any other existing liens against the property must be paid off at or before closing. You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.

4 The reverse mortgage loan balance grows at the same rate as the available line of credit. Line of credit growth occurs and is only a benefit when a portion of the line of credit is not used. The unused line of credit grows over time and more funds become available during the life of the loan.

5 The funds available to the borrower may be restricted for the first 12 months after loan closing, due to HECM reverse mortgage requirements.  In addition, the borrower may need to set aside additional funds from the loan proceeds to pay for taxes and insurance. This disbursement option is only available for a fixed rate loan.

6 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.