How Reverse Mortgages Can Help Seniors Age In Place, Part 1

By Amara Rose

Aging in place. It’s a relatively new term for a very old concept: remaining in your own home as you grow older. Once upon a time, this wasn’t an issue. Extended families ensured that someone would be available to look after Grandma should the time come when she needed assistance.

Today, when even nuclear families are something of a novelty, the picture has radically shifted. While many people live healthy, active lives well into their 80s and 90s, and are able to care for themselves in their own homes, others require assistance at some stage due to circumstances such as poor health, an accident, or a similar need that precludes their ability to continue managing independently.

For people who are healthy and want to stay in their own home as they age, a reverse mortgage can be a key vehicle to make this a reality. The first step in generating reverse mortgage leads with this population is determining whether aging in place is in a senior’s best interest.

Here are seven guidelines you can use to help homeowners decide whether aging in place makes sense for them, and if so, whether to explore a reverse mortgage — or whether it would be prudent to consider other housing options. Aging in place can serve a senior well if:

  1. They have sufficient equity in their home to qualify for a reverse mortgage (LTV)
  2. Their health is generally good, and they’re mobile.
  3. They have a network of local family, friends, and neighbors they can rely on.
  4. They drive, and alternate transportation is readily accessible.
  5. They live in a safe neighborhood.
  6. Their home can be modified to address changing needs.
  7. They’re outgoing, well connected, and able to reach out for social support.

But, what if one partner later becomes ill or requires assistance?

In Part 2 we’ll look at housing options for seniors who may no longer be able to live independently in their own home.

11 comments

James E. Veale, CPA, MBT August 17, 2011 at 7:19 am

Based on the biggest issue facing our industry it was surprising not to see sufficient monthly cash flow on the list.

Over the last week, a regionally recognized senior community planner and I spent several hours discussing the future of these projects. One thing which came as a big surprise was the latest move to provide divorce counseling and planning within these communities due to the surprising rise in divorce rates among those born before 1946.

We need to develop our understanding of personal finances, real estate titles, estate planning (beyond mere estate tax planning), marital issues, and changes in legal relationships to see when a reverse mortgages might be of greatest need. Even though divorce is personally abhorrent, it is a fact of our age. Most Americans who marry will experience at least one divorce. Today like strategic default, some marriages end in a strategic divorce even though the relationship with the former spouse remains monogamous.

While elder law attorneys are important to the expansion of our industry, surprisingly to some degree so may family practice attorneys be as well. In major metropolitan markets like NYC, LA, Chicago, the Bay Area, Atlanta, the Dallas metroplex, and Houston, it seems we can never meet all of the professionals in those communities but in smaller communities, a circle of professionals who provide a wide array of services can be an important ring of referrals.

In a small industry it is easy to see change as an overwhelming and horrible new barrier but in times like these our eyes need to be on the needs of seniors and understanding how that population base is changing. Too much of the time, we are either overly worried about things we cannot change or trying to change our own situation. Someone I admired, who passed away in the last decade, used to admonish that we need to get our eyes off of ourselves, our situation, our industry, etc. and look at those we serve to see what it is THEY need. I think we all need a little of that admonition right about now.

Reply
admin August 18, 2011 at 12:44 pm

Jim,

A very good point indeed. Monthly cash flow could be added to the list as it determines the long term ability of the homeowner to meet continuing obligations of the loan. To hear about divorce counseling is quite a surprise. As you say, in the end it is the ultimate needs of the borrower that should direct our steps.

Reply
Beth Paterson August 19, 2011 at 8:33 am

It appears you only focus on staying in one’s home if the seniors are healthy. It’s also a great tool when one is having health issues and needing home care. The reverse mortgage can pay for home care which can help the senior homeowner remain independent, in their home longer, and have more funds to pay for home care.

Using the reverse mortgage to remain in one’s one with home care can be more viable than moving to an assisted living and paying for the care there. This also helps reduce reliance on government funding. See the comparison of costs and length of time in my blog article “Be Educated About Your Options of Care and Financing The Care” http://wp.me/pxPEm-9A

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admin August 19, 2011 at 9:36 am

Beth,

Good point and I would agree. A reverse mortgage is a key component in assisting a senior facing health issues allowing them in many cases to continue living an independent lifestyle with some assistance. A personal friend of mine owns a non-medical home care company which also assists my 91 year old Godmother. I hope the new HUD protocols take this consideration into account when scoring borrowers for ‘red flags’ on the FIT & BCU.

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Amara Rose August 19, 2011 at 11:26 am

Hi Beth,

Thanks for your insightful comment. You’ve anticipated the rest of our series, which will indeed look at both alternative senior housing options, and services (such as home health care) to help seniors remain in their own homes as they grow older and their needs change.

Stay tuned ~

Reply
Terri August 21, 2011 at 8:19 pm

And staying in their home until such time, I am finding 99% of the time, is one of their main goals. Seminars with dedicated specialist for senior needs is so important.

Reply

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