Reverse mortgages favored, but seniors wary

Nursing Homes, March, 2005 by Douglas J. Edwards

A new report from the National Council on the Aging (NCOA) highlights the hundreds of billions of dollars seniors have locked up in home equity that could be used to pay for LTC services--and their reluctance to access this financing source. According to the study, more than 13 million Americans could tap $695 billion through reverse mortgages, which allow older homeowners to convert home equity into cash while living at home as long as they want. Not only could seniors use the funds to remain in their own homes, Medicaid would save $3.3 billion annually (with a 4% take-up rate) by 2010.

It sounds like a win-win situation, but seniors are reluctant to consider reverse mortgages, the report notes. Although the report says that 67% of older homeowners are aware of reverse mortgages, only 9% said they were likely to use this financing option because they worry about risk of impoverishment and not being able to leave their homes to their children.

"We need expanded public education, and additional work to explore how to reduce the cost of tapping home equity, strengthen consumer protections, and promote innovation," said Barbara Stucki, PhD, project manager for NCOA's Use Your Home to Stay at Home[TM] Program. "Overcoming these obstacles will mean that reverse mortgages can play an important role in helping many older Americans pay for the supportive services they need to continue to live at home safely and comfortably."

The 104-page report, funded by the Centers for Medicare & Medicaid Services and the Robert Wood Johnson Foundation, is available at: www.ncoa.org/attachments/ReverseMortgageReport3.pdf.>

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