Using a Reverse Mortgage Line of Credit to Cover Homecare or Long-Term Care Expenses in San Diego and California

Introduction

As we age, planning for in-home care becomes more important, especially in a state like California where everything is expensive. A strategy that has worked well for many older homeowners is a reverse mortgage line of credit. The reverse mortgage can offer a practical way to cover in-home care costs. In this article, we’ll break down the basics of a reverse mortgage line of credit, its benefits, and important considerations specifically tailored for Californian homeowners.

Understanding a Reverse Mortgage Line of Credit in San Diego and California

A reverse mortgage line of credit is a specialized home equity loan choice that California seniors can use to tap into to funds for in-home care expenses. Unlike conventional mortgages where the borrower pays the lender in monthly payments, a reverse mortgage allows the borrower to use a portion of their home’s equity to receive tax-free money that can be used to cover the costs of in-home care services. (Funds from a reverse mortgage are considered loan proceeds and not taxable income)

Benefits of Using a Reverse Mortgage Line of Credit for In-Home Care in California

1. Convenient Access: The flexibility of a line of credit means the funds available can be drawn when needed. This adaptability is particularly helpful for handling the unpredictable costs of in-home care, which can be quite expensive in California.

2. Stay in their California Home: With a reverse mortgage, the borrower can continue to reside comfortably in their California home while receiving the necessary care. The loan only becomes due when the last borrower permanently leaves the home or fails to pay ongoing property taxes, homeowners insurance and maintain the home. This strategy can allow the borrower to maintain their California lifestyle.

3. Freedom from Monthly Mortgage Payments*: Seniors often have fixed incomes, and the absence of monthly payments with a reverse mortgage can provide some additional financial security.* (borrower must still pay ongoing property taxes and homeowners insurance plus maintenance on the home)

4. Proceeds are Not Taxable Income**: The money received through a reverse mortgage line of credit in California is tax-free, offering the benefit of the funds for in-home care needs. The funds paid out to the borrower are loan proceeds and not taxable income. **

5. Secure Option for Heirs: A reverse mortgage is a non-recourse loan. If the loan amount surpasses the home’s value, your heirs won’t be required to cover the difference.

6.  Growth Feature on Available Line-of-Credit Funds Over Time: One of the most powerful features of the HECM reverse mortgage line-of-credit is that the funds available to borrower will grow larger over time – providing access to additional borrowing power over time.  Growth takes place on funds left in the available line-of-credit and not drawn out.  (funds previously drawn will not grow).  

Important Considerations for California Homeowners Considering a Reverse Mortgage

1. Costs and Fees: It’s important to understand the costs associated with a reverse mortgage, including initial fees and interest. These factors can influence the total amount available to you.

2. Impact on Home Equity: While a reverse mortgage provides financial assistance, over time the loan will grow larger and can gradually reduce home’s equity. It may affect plans for passing down the California property to your heirs as the loan becomes due and payable after a maturity event.

3. Loan Repayment: Repayment of the reverse mortgage becomes due when the last borrower permanently leaves their California home or another maturity event.* This could involve selling the property or using other assets to settle the loan.

4. Knowledge and Education are Key: Before proceeding with a reverse mortgage, the borrowers will undergo counseling to ensure each borrower and homeowner is well-informed about the process and to explore other suitable options.

Paying For Homecare in San Diego and California With a Reverse Mortgage

Conclusion

For California seniors looking for an option to cover in-home care expenses while enjoying the comforts of their own homes, a reverse mortgage line of credit can be an attractive solution. The loan choice offers flexible access to funds, ability to preserve the California lifestyle, and tax-free benefits make it an attractive choice. As always remember to carefully evaluate costs, potential impacts on home equity, and the repayment process. It is advised to always consult a financial advisors and counselors familiar with California’s specific regulations. Proper research will empower the borrower to make the best decision for themselves.

John Correll, CRMP is a San Diego based Certified Reverse Mortgage Professional who serves the reverse mortgage needs of borrowers across the entire state of California.

* A Reverse Mortgage has no monthly required monthly mortgage payments. However for the loan to remain in good standing, at least one borrower must continue to occupy the property as their primary residence, plus pay ongoing property charges such as property taxes, homeowners insurance and any HOA dues (if any) plus maintain the home. As long as borrower does those items there are no monthly mortgage payments required until a maturity event.
** Funds from the reverse mortgage are paid as loan proceeds and are not considered taxable income. Not tax advice – borrower is recommended to consult a tax professional or other financial advisor

Presented by John Correll, CRMP – Accurate Reverse Mortgage Corp.
(888) 603-1550 (619) 294-9820

john@sdhecm.com
https://www.accuratereversemortgage.com/

NMLS# 1004396, 2484031

CA Bur Real Estate – Broker# 01353015, 02214678