Selecting A Long Term Care Provider
Long term care is needed for many people in their later years, and since we all get there eventually, it is something for everyone to consider. It is never too late to start thinking about long term care insurance. Did you know that more than one third of the population who are younger than retirement years require care for a prolonged period of time due to unfortunate circumstances and accidents? Long term care insurance would be very handy to have for that as well!
I Need Long Term Care Now! How Can I Afford It?
A nursing home usually cost between 100 dollars to 150 dollars per day. Assisted living costs somewhere between 50 dollars to 90 dollars per day. How is one to pay for all that?
All you need is a reverse mortgage on your home. As long as you are at least 62 years of age and are living in your home (or someone (who qualifies) who has joint ownership living in the home), you can have a reverse mortgage on your home to pay for your in-home constant care. Or, you can sell your home and use that money to pay for your out-of-home care.
Reverse Mortgage
A reverse mortgage is when the amount of money that you would normally get back from selling the house is used to pay for in-home care. The lender is paid upon death or upon selling the house. That money is tax-free so it will not cost you more in taxes. Most banks are not equipped to handle reverse mortgages. To get a reverse mortgage, one would have to look up the Federal National Mortgage Association (AARP) to get started on a reverse mortgage.
Myths About Reverse Mortgages
Myth 1: I will lose my home with a reverse mortgage.
Answer: With a reverse mortgage, the house still stay in YOUR name (the borrower). The lender can't therefore kick you out of your own home. And, the lender cannot be paid until YOU decide to sell your home, or upon death. Meanwhile, you can enjoy having all that money to yourself to do with whatever you wish. It really is no different than taking out a traditional loan and using that money for yourself, but then how would you repay that loan? With a reverse mortgage, your own house pays for it after you are gone. That is how it works. It really is quite simple.
Myth 2: After I am gone my entire home will go straight to the lender.
Answer: First of all, of the money that you would get from selling your house, you are only allowed to use 50% of that for the loan (thanks to the federal government set limits). Therefore, even after the lender is paid, half of the money you would get from selling your house will still be yours to will out according to how you wish.
Myth 3: Reverse mortgages are more expensive than traditional mortgages
Answer: They are very similar in cost to traditional mortgage loans. Reverse mortgages cost only about one percent more in closing costs than traditional mortgage loans but you do not have origination fees associated with traditional mortgages, and interest rates tend to be lower as well with reverse mortgages because they are based on the US Treasury note instead of the prime rate.
Myth 4: I will have to pay taxes on a reverse mortgage
Answer: You do not need to ever pay taxes on money you get from your reverse mortgage because it is considered a loan, not income.
Myth 5: A reverse mortgage will change my social security and medicare amounts
Answer: A reverse mortgage will have no affect on social security or medicare amounts because a reverse mortgage is considered a loan and not income.
Myth 6: With a reverse mortgage I will no longer be able to qualify for supplemental security income or Medicaid
Answer: The loan can be structured in a way that would not interfere with your qualifications for government benefits, or other such benefits.
What Happens If My Home Becomes Valued At Less Than The Payoff To The Lenders?
Suppose you are gone and the lenders must be paid but the house is now worth less than the amount to be paid. In other words, your house had been decreasing in value over the years. Do not worry. The lenders will only be allowed the amount of money that the house is valued at since the loan will never change over the years, so if your home is worth less at the time of payout, it will be their loss, not yours.
When Should I Take Out A Reverse Mortgage?
Even though you qualify to take out a reverse mortgage loan when you are 62 years of age, it is best to hold off as long as possible. The longer you wait the more money you will have because you will have the same amount of money to cover you for a shorter period of time.
Should I Take Out My Money In Lump Sum Or As Income?
If you have a lot of money that must be spent right away such as needing to remodel your home to make it safer for you to get around, then lump sum is needed. The rest can be invested to produce an income as needed. If you do not need a lump sum to get by, then an income is recommended. If you are worried that the cost of your care may exceed your income amount, then, if you qualify, it may be a good idea to use part of the income to purchase long term care insurance. It could be a life saver down the road. You won't qualify forever to be insured when you would need it most.
Medicare and/or Medicaid Will Pay For My Long Term Care, Right?
No! Medicare only pays for temporary high-skilled care. For example, if you got into an accident, Medicare would pay for only a short period of time while you were being mended back up. It would not pay for basic daily living expenses (which is what long term care would be). Medicaid is also a federal government program, only this program is only for those that do not have hardly any assets or money at all. It is therefore a welfare program. Still, Medicaid will only pay for half of all nursing care costs, which means the person that has no money still has to come up with a way to pay the other half of nursing care expenses.
Buying Long Term Care Insurance
If you are working and are able to purchase long term care insurance through your employer, then that will be the most cost effective for you. With the discounted group rates it will be cheaper for you than an individual plan. Just make sure that if you change jobs, your insurance will still be intact.
Also, even if the price seems good, be suspicious. Many times insurance companies will start you off on a low price to try and get you to sign up, and then they will increase their rates on you over and over again. Some companies have been reported raising their rates 50 percent in just only a year. Be sure to know the history of the company, and how many times they have raised their rates over a given period of time. There are also options you can get to allow you to be able to cancel with companies without being penalized. However, canceling should be a last resort. The older you are when you start a new insurance plan, the higher your premiums will be, and the state of your current health may not even allow you to be reinsured at all. Anything a company promises you, be sure to get it in writing.
