How a Reverse Mortgage Can Help Cover Long-Term Care Costs

As retirees live longer and healthcare costs continue to rise, planning for long-term care has become one of the most urgent challenges facing older adults. Many people want to remain in their homes for as long as possible, but the financial realities of in-home care and medical support often make that difficult.

A reverse mortgage can help bridge this gap. By unlocking your home equity without requiring monthly mortgage payments, it offers a flexible way to pay for long-term care while allowing you to age safely and comfortably in place. Let’s look at how a reverse mortgage works and how it can be used to fund long-term care.

Why long-term care planning is so financially challenging

Long-term care is expensive, unpredictable, and rarely covered by traditional insurance. Even retirees who have saved diligently may find that their medical needs outpace what their retirement accounts and Social Security benefits can support.

Some of the biggest financial challenges include:

• High cost of care: In-home care can range from basic assistance with daily activities to skilled nursing services, and each comes with different price points. Nationally, home health aides and personal care services can cost thousands per month.
• Unpredictability: A sudden fall or a chronic illness diagnosis can drastically change a household’s care needs. And most retirees don’t know whether they’ll need occasional help or round-the-clock support.
• Limited insurance coverage: Medicare generally doesn’t cover long-term custodial care, and long-term care insurance policies can be expensive or difficult to qualify for later in life.
• Risk of depleting savings: Without an additional financial resource, many retirees face the real fear of outliving their savings or being forced to sell their home to pay for care.

How a reverse mortgage supports aging in place

A reverse mortgage allows homeowners age 62 or older to convert part of their home equity into cash, without selling the home or making monthly mortgage payments. The loan isn’t due until the last borrower sells the home, moves out permanently, or passes away. Here’s how a reverse mortgage can help with long-term care planning:

1. Access to tax-free funds

Reverse mortgage proceeds aren’t considered taxable income. This makes it easier to stretch your retirement assets and avoid tapping taxable investment accounts that could trigger capital gains.

2. Flexibility to pay for different types of care

The funds can be used for a wide range of long-term care needs, including:

• In-home care aides
• Skilled nursing visits
• Physical or occupational therapy
• Medical equipment and home modifications
• Respite care for a spouse or caregiver
• Transportation for medical appointments
• Prescription drug support or chronic illness management

Because care needs often evolve, the ability to draw money as needed (instead of taking a lump sum) can be a major benefit.

3. A line of credit that grows over time

One of the most overlooked advantages of a reverse mortgage line of credit is that the unused portion grows at the same rate as the loan balance. That means the available credit can increase over time, and typically at a rate that often outpaces inflation.

For retirees concerned about rising healthcare costs, this growth feature can act as a built-in hedge. Your future access to funds may expand even as care costs climb.

4. No monthly mortgage payments

Eliminating your monthly mortgage payment can free up hundreds or even thousands of dollars in your budget each month. This extra cash flow can help cover smaller care expenses or allow retirees to direct more of their income toward their overall health and well-being.

5. Allows you to stay in your home longer

Moving into an assisted living facility or nursing home is a major life change, and one that many retirees prefer to avoid as long as possible. Reverse mortgage funds can help cover in-home support that keeps you safe and independent for longer.

When a reverse mortgage is worth considering

A reverse mortgage is best suited for homeowners who plan to age in place for the foreseeable future. Because the loan becomes due once you move out permanently, it generally works best for retirees who are confident they’ll remain in their current home for at least the next several years. It’s also a good option for homeowners with substantial home equity, since higher equity increases the amount of available funds.

This strategy may be helpful for retirees who are struggling to keep up with rising care expenses or who lack comprehensive long-term care insurance. Accessing home equity can provide the financial breathing room needed to pay for in-home support, medical services, and home modifications without draining retirement accounts or selling investments. Many homeowners also use a reverse mortgage to preserve their existing savings for other priorities.

However, it’s important to understand the long-term implications before moving forward. Reverse mortgage funds can reduce the amount of home equity ultimately passed on to your heirs, and some families may need to sell or refinance the home to settle the loan balance later. It’s a good idea to discuss any expectations with family members first.

And while your monthly mortgage payments are eliminated, you must continue paying your property taxes, homeowners insurance, and maintenance costs. Additionally, it’s crucial to review how the loan balance will grow over time and decide which payout option best aligns with your long-term care needs.

Finally, every borrower must complete a session with a HUD-approved counselor. This step ensures you understand the loan terms, costs, and future obligations so you can make an informed decision.

The bottom line

Funding long-term care is one of the most stressful and uncertain parts of retirement planning. For homeowners who want to age in place, a reverse mortgage can offer stability and peace of mind, turning your home equity into a dependable source of income.

Whether you’re facing rising care needs today or planning ahead, a reverse mortgage can be a proactive way to preserve your savings and remain in the home you love.