Older adults and their children consider the likelihood of needing services, consider whether they would be available as a community service, figure the costs of providing needed services, decide whether you can save enough to pay for those services, and look into the possibility of long-term care insurance that provides in-home services.
Some folks might be leaning toward a reverse mortgage to finance care in their old age. The most popular and most dangerous is Home Equity Conversion Mortgages – HECM reverse mortgage Loan. Its popularity is mainly because it is insured by the US government using the FHA insurance scheme. HECM stands for Home Equity Conversion Mortgages and is administered by the U.S. Department of Housing and Urban Development (HUD). This program is often called a HUD or FHA reverse mortgage.
While all reverse mortgages pay the borrower a given amount either in a lump-sum payment, a monthly payment or some combination of the two, there are still costs — such as closing costs — associated with taking out the loan. HECM costs usually are higher than other loans and require borrowers to pay a mortgage insurance premium (MIP) equal to 2 percent of the value of the home.
HECM must be repaid in full when the borrower moves or dies. The lump sum payment includes all the peripheral costs associated with the loan, the principal, the interest and the MIP. If the housing market has slumped between the time you took out the loan and the house is sold, you or your heirs really may suffer.
