While the cost of long-term care can seem insurmountable, each family circumstance can be nuanced and unique enough for creative financial solutions. In this blog series, we are combining our years and years of experience in serving seniors with our knowledge of how to navigate paying for long-term care.

In our last post, we looked at the Home Equity Line of Credit (HELOC) as the third option for paying for long-term care. This week, we’re considering the Jumbo Reverse Mortgage as the fourth way to pay for long-term care.

 

What is a Jumbo Reverse Mortgage?

A Jumbo Reverse Mortgage, also known as a Proprietary Reverse Mortgage, is meant for owners of high-valued homes (specifically, those valued around $750k and up), and provides homeowners access to a lump sum of cash. Unlike a traditional reverse mortgage, which is backed by the US government through the Federal Housing Administration (FHA), Jumbo Reverse Mortgages are structured and deployed through private companies.

 

What Are Some Advantages to Utilizing a Jumbo Reverse Mortgage?

One advantage to the Jumbo Reverse Mortgage is access to large sums of cash to pay for long-term care, which is limited only by the equity in the property. It is possible to access more money from a Jumbo Reverse Mortgage than it would be from other reverse mortgage products. Likewise, these products generally don’t require monthly re-payments, and the Jumbo Reverse Mortgage is repaid when the house is sold.

In contrast to standard reverse mortgages, Jumbo Reverse Mortgages also do not require monthly mortgage insurance. This type of product allows seniors to remain in their homes and retain home ownership. One final advantage of Jumbo Reverse Mortgages, similar to traditional reverse mortgages, is that there is no restriction on how homeowners can spend the money awarded through the product.

 

What Are the Drawbacks of Utilizing a Jumbo Reverse Mortgage?

One drawback to the Jumbo Reverse Mortgage can be the process itself, as owners must take the entire loan amount up front at closing, and there are often various service fees involved. Non-borrowing spouses can also have more challenges in terms of protections with the property. Another obvious drawback of using a Jumbo Reverse Mortgage to pay for community-based and skilled nursing home care is the reality that the individual is borrowing money from themselves, limiting their ability to pass on assets to their heirs. However, for some seniors, this drawback is outweighed by the benefit of access to long-term care and home improvements necessitated by the golden years of aging.

In our next post, we’ll explore a fifth option for paying for long-term care and consider the pros and cons of that particular way to pay. Don’t miss it.

You can also follow this link to request our entire “11 Ways To Pay for Long-Term Care” booklet, free of charge.