Home Living
Using a Reverse Mortgage to help finance Long-Term Care
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Seniors Explore Alternative to Finance Long-Term Care Insurance Premiums through Reverse Mortgages

Reverse mortgages are quickly gaining popularity as a smart home financing alternative for senior homeowners to convert a portion of the equity in their homes into tax-free funds without making a monthly payment. Senior homeowners can use these funds in any way they wish—to supplement retirement income, pay off existing liens, cover medical expenses, make home improvements or even take a vacation. Additionally, many seniors use a portion of the tax-free funds to cover the cost of private long-term care insurance premiums. As seniors seek to live out their retirement years in comfort, they often find their lifestyles abruptly altered by unexpected medical emergencies and ensuing healthcare expenses. For those living on a fixed income, such unexpected costs can be financially crippling. Reverse Mortgages offer senior homeowners an opportunity to secure their physical and financial independence.
Reverse Mortgage Overview
A reverse mortgage is a loan that enables senior homeowners to convert part of the equity in their home into tax-free income without having to sell their home, give up title or take on a new monthly mortgage payment. In order to be eligible for a reverse mortgage from Community First Mortgage, LLC, the primary borrower and any co-borrowers must:
• Be at least 62 years old
• Occupy the home as a primary residence
• Own the home free and clear or have a small remaining mortgage balance which could be paid off with the proceeds from a reverse mortgage
One of the biggest selling points of a reverse mortgage is flexibility. The product allows senior homeowners to choose how they want to receive their mortgage funds:
• Lump sum payment for immediate financial needs
• Term or tenure monthly payments to supplement monthly income
• Growing line of credit for future expenses
• Or any combination of the above
Unlike conventional mortgages, no income, employment or credit score requirements exist. The maximum loan amount differs depending on the product. However, all reverse mortgages take the following factors into consideration to calculate the payment amounts available to a senior homeowner:
• Age of the youngest borrower
• Current interest rate
• Market value of the home
Reverse Mortgages Offer Security
Most importantly, no monthly payments are made on a reverse mortgage during its term. It simply becomes repayable when the home is sold or vacated for other reasons. Any excess proceeds belong to the homeowner or the estate. Homeowners with a reverse mortgage never owe more than the value of their homes or the amount borrowed under terms of the loan, whichever is less.
Reverse Mortgages and Long Term Care
Home equity conversion could have a dramatic impact on seniors’ ability to afford private long term care insurance. Increasingly, senior homeowners have found the means to make initial and future premium payments through a reverse mortgage. Some of the proceeds from a growing credit line, for example, could be used by a couple or an individual to pay all or most of the annual premium for either an existing or new long term care insurance policy. Additionally, the growth in the appreciated value of unused credit line funds could be used to offset any future increases in the premium rates.
For example, a 79-year-old single female who owns her $100,000 Milwaukee home free and clear could receive a credit line account of $66,149 that grows larger each year by 3.18 percent through the HUD-insured Home Equity Conversion Mortgage (HECM) program.* The HECM is the most popular reverse mortgage product in the marketplace today.
Reverse Mortgage Volume at Record Levels
According to the Department of Housing and Urban Development (HUD), the number of reverse mortgages has more than quadrupled since the early 1990s when the product was first introduced. As of September 30, 2002 lenders closed 13,049 federally insured reverse mortgage loans—a 63 percent increase over the former record of 7,982 set in 1999. Additionally, the volume of HECM loans, the dominant reverse mortgage product available, increased 68 percent in 2002 over 2001, according to the National Reverse Mortgage Lenders Association.
For more information about reverse mortgage products and services, contact Dan Smith, at 303-674-2205.

*For illustration purposes only based on rates as of Aug. 1, 2003.
Neither ColoradoHomeLoans.com, nor any of its representatives, may give tax advice. Please consult your tax advisor for information about your particular circumstance.





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