What Happens to My Reverse Mortgage if I Go Into a Nursing Home?

If you have equity in your home and are over age 62, a reverse mortgage can tap into a portion without selling or renting the home. You will only have to repay a reserve mortgage once you sell the house, die, or haven't lived there for over 12 months for medical reasons (six months for nonmedical reasons). A reverse mortgage can seem the perfect solution — unless you must move into a nursing home. If you ask yourself, “What happens to my reverse mortgage if I go into a nursing home?” you can find the pros and cons below. 

Key Points

• You will typically need to sell your home if it has a reverse mortgage and you've moved into a nursing home. 
• If a co-borrower on the mortgage still lives in the home, they may continue living in it.
• If you are temporarily in a rehab or assisted living facility, you might not need to sell your home — as long as it's temporary.

Understanding Reverse Mortgages

A reverse mortgage is a mortgage loan secured by your primary residence. It's available to borrowers who have significant equity built up in the property. Reverse mortgages are usually promoted to older homeowners. 

According to the Consumer Financial Protection Bureau, the most common type of reverse mortgage is a Home Equity Conversion Mortgage (HECM). To qualify for a HECM, you must be 62 years old or older. Unlike a traditional mortgage, a reverse mortgage doesn't require monthly repayments.

The benefit of this is access to funds when you need them, typically to support retirement or medical expenses. On the other hand, you will delay repaying your mortgage in full. Some homeowners may use a reverse mortgage to pay off their primary mortgage, but this has pros and cons. 

Overview of eligibility criteria for a reverse mortgage:

• You'll need to be at least 62 years old to qualify.
• You'll usually need a minimum of 50% equity in the home to qualify. 
• Usually, there are no credit score or income requirements.
• One additional HUD requirement is that you complete a counseling session.
• You must live in the home. 

Impact on Reverse Mortgage When Entering a Nursing Home

If you move into a nursing home, what happens to your reverse mortgage depends on how long you're there. If it's a temporary rehabilitation facility and you're there for under 12 months, you won't need to repay your mortgage. However, a move into a nursing home is usually a step that isn't reversed. In that case, you may be required to repay your mortgage.

• If you don't have a co-borrower who lives in the home, you must repay the reverse mortgage once you haven't lived there for 12 months. 
• If you have a co-borrower who remains in the home, they may continue to receive reverse mortgage disbursements and live in the house without repaying the mortgage.
• The reverse mortgage loan must be paid back if someone else lives in the home but is not a co-borrower. 

Most commonly, a reverse mortgage is repaid by selling the home. However, you can live outside the house in a nursing home or an assisted living facility for up to 12 months before the reverse mortgage must be repaid. Your reverse mortgage will also be due if you're away from the property for more than six months for a nonmedical reason.

To repay your reverse mortgage, you can sell the property or use other savings (if available) to repay the debt. 

How to Deal With Your Reverse Mortgage Lender if You Go Into a Nursing Home

You should notify your mortgage lender if you go into a nursing home. Even if you plan not to notify them, your lender could find out. Therefore, it's better to inform the lender directly to improve communication and transparency. 

If you enter a nursing home or assisted living facility, your reverse mortgage lender will typically call the note due in full. However, most lenders allow a one-year grace period. That gives you time to sell the property or see if you can return to the home. You must repay the reverse mortgage if you can't move back into your home.

How Does Moving Into a Nursing Home Affect Your House Ownership?

Moving into a nursing home does not immediately affect your homeownership. You will not lose property ownership because you move into a nursing home. However, if you have a reverse mortgage, the mortgage will be due after 12 months. You might be forced to sell the property to repay the loan by then.  

Can Your Spouse Continue Living in Your House?

Whether your spouse can continue living in your house depends on whether they were listed as co-borrowers on the reverse mortgage. If your spouse was a co-borrower on the reverse mortgage, they could. However, if your spouse was not listed as a co-borrower on the reverse mortgage, you must repay the mortgage after 12 months if you cannot move back home. Naturally, this can be challenging for many couples and a reason to ensure both spouses are listed as co-borrowers on any mortgage. 

How Does Using Your Reverse Mortgage Pay for Assisted Living Work?

Generally, you cannot use a reverse mortgage to pay for assisted living. However, if it's a short-term stay, it may be possible if it's not a Medicaid-funded nursing home. If you move into a Medicaid-funded nursing home, you must sell the house. When this happens, the bank is repaid for the reverse mortgage, which can make you more eligible for Medicare funding. 

However, because a reverse mortgage can be used for any purpose, you could use the funds for modifications that allow you to remain in the home. You could pay for home care or make modifications like stair lifts that enable you to stay in your home and not enter a care facility.

Compare the Best Reverse Mortgage Lenders from Benzinga’s Top Providers

If you need a reverse mortgage, you can find some of the best mortgage lenders from Benzinga's top providers here: 

Protecting Your Property and Your Family

While no one can predict what might happen to their health, there are proactive steps you can take to protect your homeownership and your family. First, if you must take out a reverse mortgage, ensure your spouse is a co-borrower. Then, before moving into a nursing home, consider getting home care or making adjustments to the property to make living at home more feasible.

Finally, if you have to move into a nursing home, speak with your lender. By taking steps now, you can help protect your property and your family, whatever happens down the road. Instead of a reverse mortgage, you can also consider a home equity line of credit (HELOC). Start by researching some of the best HELOC lenders here. 

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