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Options Needed to Pay for Long Term Care

by Carol Marak
Disabled man in assisted living center

Are you looking for ways to pay for long-term care? The national average cost per month for senior housing starts at $4,000. At home personal care costs $23 an hour. There is no way to avoid the expenses, but there are ways you can put a home’s equity to work.

The most valuable asset a senior has is a home. And today, the most common option to pay for long-term care is using the home’s equity through a Reverse Mortgage where the lender makes payments to the borrower. The borrower does not pay back the loan until the house is sold or vacated. And as long as the borrower or co-borrower (a spouse) lives in the home, no monthly payments are due on the loan balance. But property taxes, maintenance and upkeep, insurance, and association dues are the borrower’s responsibility. The loan is due in full when the last borrower, the remaining spouse, dies, sells, or permanently moves out.

I learned about another option which unlocks the home’s equity without ever having to worry about leaving the home or getting foreclosed. The senior receives part of the home’s value in cash upfront and part in guaranteed monthly payments in return for the ownership of it. Maintenance, insurance, and property tax is handled by the new owner so the seniors can live in their home for the rest of their life. It is not a reverse mortgage.

This transaction originates in France (called a viager) where people have been doing these for over a thousand years – it has actually been part of their laws since 876 AD. However, in Europe this deal is facilitated between two individuals. The seller agrees to transfer the ownership of their home to the buyer for a downpayment and regular cash installments for the rest of their life. The seller has the right to live in their home for the remainder of their life and the buyer takes over only after the seller passes away.

It’s brand new and may be available in the States soon. Compared to a reverse mortgage, clients are not taking out a mortgage or paying interest. There are no hidden fees.

The senior transfers the title but keeps the right to live there for their lifetime. They receive part of the home value when signing and part of it through guaranteed monthly payments until they pass away. The new owner handles paying property tax, insurance, and basic maintenance so there is no foreclosure risk.

For those who have no heirs, this option is the perfect choice as there is no incentive to leave the home and the equity in it behind. For seniors with heirs, their heirs no longer need to worry about the financial wellbeing of our clients. And if the client passes away before the originally invested money has been paid out, the remainder of the original amount is paid back to the heirs.

Carol Marak, aging advocate and editor at Seniorcare.com. She’s earned a Certificate in the Fundamentals of Gerontology from UC Davis, School of Gerontology.

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