Medicare.gov - Paying For Long-Term Care

A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD's reverse mortgage provides these benefits, and it is federally-insured as well. To obtain a HUD-insured reverse mortgage you must be 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home.

For more information about a reverse mortgage, visit the U.S. Department of Housing and Urban Development.

To evaluate whether a reverse mortgage is right for you, and the amount of money that you might receive by using a reverse mortgage, visit the American Association of Retired Persons (AARP).

Listed below are some of the opportunities and requirements/limits about home equity conversions:

Reverse Mortgages Opportunities:
Reverse Mortgages Requirements/Limits:
How you get your reverse mortgage payments is your choice.
*The cost of your long-term care expenses might be more than the amount you borrowed. You may have to sell your home to repay back the reverse mortgage loan.
There are no income or medical requirements to qualify.
*You may outlive the length of a reverse mortgage. If this happens, you may have to sell your home to repay back the reverse mortgage loan.
You can use your money from the reverse mortgage to buy a long-term care insurance policy, annuity, out-of-pocket, or single premium life/long-term care policy.
If you sell your home or no longer live in your home permanently, and if you used all of your money (equity) to pay off the reverse mortgage loan, then you might not have anything left for your heirs (family or friends).
It can increase your monthly income.
The money you get from a reverse mortgage counts towards your income. This may affect your eligibility for Medicaid or other state assistance programs.
The money you get from a reverse mortgage is tax-free. For more information, you should check this out with the Internal Revenue Service (IRS).
Because you own your home, you must still pay for your property taxes, homeowners insurance, home repairs, and utilities (such as phone and electric). If you don’t pay for these, then you might have to repay the loan in full immediately.
When you sell your home, no longer live in your home permanently, or when you die, you or your estate will have to repay the money back that you got from the reverse mortgage. If you have any money (equity) left over, then that belongs to you or to your heirs (family or friends).
Loan amounts don’t adjust for inflation (future price increases).
Reverse mortgages doesn’t affect any of your other assets (such as your personal checking or savings accounts).
If the cost of long-term care exceeds the loan amounts, then you may need to apply for Medicaid eligibility and spend down your assets to cover the costs of long-term care.

* In the HECM program, a borrower can’t be forced to sell the home to pay off the mortgage, even if the mortgage balance is more than the value of the property. A HECM loan doesn’t need to be repaid until the borrower moves, sells, or dies. When the loan must be paid, if it exceeds the value of the property, the borrower (or the heirs) will owe no more than the value of the property. Federal Housing Administration (FHA) insurance will cover any balance due to the lender.

Page Last Updated: April 10, 2007