For most seniors, the biggest asset that they have once they decide to retire is the equity in their home (Ahlstrom, Tumlinson, & Lambrew, 2011). However, this asset is usually not an option for seniors unless they choose to use a home equity loan. After working for twenty plus years and paying off a majority of tangibles assets, who really wants to add another long term bill to their life? For many seniors home equity loans are not even a real option, but a reverse mortgage can be.
A reverse mortgage is a loan for a senior homeowner that uses a portion of their home equity as collateral. The loan does not have to be repaid until the homeowner dies or moves out of the premises permanently. With reverse mortgages, the payments are in reverse as the homeowner receives payments from their bank. However, the loan balance must be paid within in six months of the homeowners’ death or the home will be sold to pay off the balance. For seniors with limited funds a reverse mortgage can be a way to pay for prescription medication, hospital visits or home health care in their later years.
The American Hospital Association estimates that one-third of the US population are seniors and roughly thirty-seven million seniors will be managing one or more chronic medical condition within the next twenty years (Orlovky, 2007). For these countless seniors with long term care needs reverse mortgages are a way for them to survive while the broken health care system that we have is repaired. Personally, if I was a senior citizen and required some form of long term care I would want to have a home health aide come to my residence and assist me. That would be way more efficient than making constant trips to medical professionals for ailments that could have been avoided with proper assistance. Now, hopefully with this extra cash flow alot of individuals can do the same.
References
Ahlstrom, A, Tumlinson, A, & Lambrew, J. (2011, September 11). Linking reverse mortgages and long-term care insurance. Retrieved from http://www.brookings.edu/papers/2004/03use conomics_ahlstrom
Orlovky, C. (2007). Thebaby boomers’ massive impact on health care. Retrieved from http://www.nursezone.com/nursing-news-events/more-news/The-Baby-Boomers%E2%80%99-Massive-Impact-on-Health-Care_28946.aspx
