At the same time every day expenses go up, so do all of the the costs of caring for older family members. Where to find the money to finance in-home care, an assisted living facility, or ultimately the high cost of a nursing home is a difficult challenge for many families. One resource for the necessary money many caregivers haven't considered is a reverse mortgage.



A reverse mortgage is a source of money for everyone over age 62 who has a house with substantial equity. They call it a reverse mortgage because it is structured "backwards." The lending institutution makes cash available to the homeowner, instead of the borrower making payments to the lender. After the homeowner dies or moves out of the home, the house is then sold and the loan is paid off. Any funds left over after the loan is cleared then goes to the original homeowner or to his or her heirs.

If the family want to keep the home, they can decide to either clear the reverse mortgage or take out a new mortgage on the home themselves.

There are three ways to receive funds from a reverse mortgage:

1. Many reverse mortgage holders choose to receive a one-time payment. They will then put these funds into an investment account and draw on it as needed;

2. Some find that a scheduled cash payment works better. They can choose to receive equal amounts every 30 days to cover their expenses, leaving the remainder of the available funds with the bank. This option leaves more of the money with the bank and can reduce the total that will ultimately have to be repaid when the home is sold.

3. Borrowers who would rather not receive the entire amount as a lump sum, but who would prefer to keep the entire amount available for emergencies, may prefer choose to create a line of credit. The available funds remain with the bank, but is readily available to be taken in any amount as wanted.

Reverse mortgage loans are often more costly than a traditional mortgage. Origination and other fees, closing costs and interest are often more expensive than conventional mortgages. Because some banks require the borrower to attend financial counseling before closing, these loans can take longer to close.

Although using a reverse mortgage will eliminate the need to make monthly mortgage payments, it will still be still necessary to pay taxes and insurance premiums, and to keep up the home. If the borrower does not keep up with these things the lender can "call" the loan or reduce the amount of funds available so these obligations can be paid directly.

Reverse mortgages are often a practical way to take money for caregiving out of a home while still being able to live in it. They are also complicated, they can be expensive, and they will reduce the amount a borrower can leave to family members. For these reasons it is a good idea to discuss this option with your family and to get advice from financial advisors before you proceed.