Study Says Seniors Benefit From Reverse Mortgage
Reverse mortgages could be used by millions of older adults to pay the rising costs of long-term care, a study by the National Council on the Aging has found.
“One of the paradoxes of our long-term care system is that older Americans are struggling to live at home at the same time they own more than $2 trillion in untapped wealth,” the report said.
Council President James Firman said senior homeowners have, on average, $72,128 in equity that could be tapped to pay for years of home care visits or for home modifications.
“The extra cash could go a long way to help with care-giving and other long-term care expenses,” he said.
The nation spends about $135 billion a year on long-term care, most of it paid out of pocket by individuals or by Medicaid.
Reverse mortgages are loans that allow homeowners 62 or older to convert home equity into cash while still living in their houses. They receive the money as a lump sum, line of credit or monthly payments. The loan comes due when the borrower moves out or dies.
The study was funded by the Centers for Medicare and Medicaid Services and the Robert Wood Johnson Foundation.
Dr. Mark McClellan, the Medicare and Medicaid administrator, estimates that increasing the market for reverse mortgages could save Medicaid $3.3 billion annually by 2010.
The study found that many older adults are reluctant to use a reverse mortgage to “age in place,” seeing it as an option mainly for the financially desperate.
“Many worry that they risk impoverishment or won’t be able to leave a legacy to their children if they tap home equity,” the report said.
Consumer advocates recommend that older adults who are “cash poor but house rich” consider alternatives to reverse mortgages, such as deferring payment of real estate taxes.
Source: Augusta Chronicle, The
