What Happens to a Reverse Mortgage If You Enter a Nursing Home?
Many seniors use reverse mortgages to get extra money for retirement and living expenses. You usually repay the loan when you die, move out, or fail to keep up with home maintenance, taxes, and insurance. But what happens to your reverse mortgage if you need to move into a nursing home?
Below, we’ll discuss how moving into a nursing home can impact your reverse mortgage.
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What happens to a reverse mortgage if you enter a nursing home?
If you have a reverse mortgage and need to move into a nursing home, you might be worried about what will happen to your loan. The good news is that you have options, and moving into a care facility doesn’t always mean you must repay your reverse mortgage immediately.
If you have a co-borrower or eligible non-borrowing spouse, they may be able to stay in the home. And if your nursing home stay is temporary, your reverse mortgage can continue unchanged.
Here are some situations in which you may or may not be able to keep your home if you enter a nursing home:
| Situation | Outcome |
| Single borrower enters nursing home | Loan due after 12 months out of home |
| Co-borrower remains in home | Loan continues until co-borrower or spouse passes away or moves out |
| Married couple, one borrower, one non-borrowing spouse | Non-borrowing spouse may stay if they meet eligibility criteria but won’t receive proceeds |
When a single borrower enters the nursing home
If you’re a single borrower with a reverse mortgage and move into a nursing home, you usually have up to 12 months before your loan becomes due. If your stay is temporary and you return home within a year, your reverse mortgage will continue as before.
However, if you stay in the nursing home for over 12 months, your reverse mortgage must be repaid. You can do this by selling your home, using other funds, or through a deed-in-lieu of foreclosure.
When there’s a co-borrower or spouse
If you have a co-borrower on your reverse mortgage—whether they’re a spouse, child, or someone else—they can stay in the home even if you move into a nursing home for more than 12 months.
The loan won’t become due until the co-borrower passes away or moves out. That said, they must continue meeting the loan’s obligations, such as maintaining the property and paying taxes and insurance.
If the co-borrower ends up moving into a nursing home, too, the loan will become due after you’ve both been out of the home for 12 months.
When you’re married with a non-borrowing spouse
If your spouse or partner lives with you but isn’t a co-borrower on your reverse mortgage, they are considered a non-borrowing resident.
In this situation, you’ll need to repay your loan if you move out of the home for at least a year—such as to a nursing home, assisted living, or other healthcare facility. And as a result, your non-borrowing spouse or partner may need to move out.
However, a non-borrowing spouse may be able to stay in the home without paying off the loan if you have a home equity conversion mortgage (HECM), the most common type of reverse mortgage.
This depends on when you took out the loan and whether your spouse qualifies as an “eligible non-borrowing spouse” under the Department of Housing and Urban Development’s (HUD’s) rules. Your spouse must meet these criteria to be considered an eligible non-borrowing spouse:
- They were legally married to you when you took out the reverse mortgage.
- They remained married to you for the duration of the loan.
- They’re named as a non-borrowing spouse in the loan documents
- The home is still their primary residence.
These rules specifically apply to HECMs. If you have a different type of reverse mortgage, the terms and conditions for non-borrowing spouses may vary. In addition, spouses who are not listed as co-borrowers on a reverse mortgage cannot receive proceeds from the reverse mortgage.
Ask the expert
It is recommended that both spouses be listed as the borrower on a reverse mortgage. There is an example of a federal appeals court that ruled in favor of an insurance company that it may foreclose on a Florida couple’s reverse mortgage after the death of the primary borrower, the husband, even though his wife, now a widow, was still living in the house. While there are protections for non-borrowing spouses, many are still facing foreclosure and eviction.
Can you use a reverse mortgage to pay for a nursing home?
You can use the funds from a reverse mortgage to pay for nursing home care or other long-term care expenses without any restrictions. But keep the residency rule in mind, which states that the loan will become due and payable if all borrowers have moved out of the home for more than 12 consecutive months.
Considering this rule, there are a few scenarios in which you can use a reverse mortgage to pay for nursing home expenses while still maintaining your loan:
- You or your spouse receive in-home care: If you or your spouse require long-term care but can receive it at home, you can use the reverse mortgage funds to pay for these expenses without triggering the residency rule.
- You’re in a nursing home for less than 12 months: If your stay in a nursing home is temporary and lasts less than 12 consecutive months, you can use the reverse mortgage funds to cover these costs without the loan becoming due.
- One borrower remains in the home: If you have a co-borrower, such as your spouse, and one of you moves into a nursing home for more than 12 months while the other stays in the home, the loan will not become due until the at-home borrower also moves out or passes away.
WarningUsing a reverse mortgage to pay long-term care expenses can be helpful, but always weigh the risks. Taking out a reverse mortgage will reduce your home equity over time, which may leave less for your heirs to inherit. Also, if you can’t afford ongoing property taxes, insurance, and maintenance costs, you could default on the loan and lose your home.
Talk to a HUD-approved reverse mortgage counselor to decide whether to use a reverse mortgage for long-term care.
Also, the Area Agencies on Aging (AAA) can help you explore long-term care options, including reverse mortgages, and connect you with local resources. Find your local AAA using the Eldercare Locator at www.eldercare.acl.gov.
Ask the expert
Paying for long-term care costs is an acceptable use for a reverse mortgage. However, you must live in the home. If you are the sole borrower and have to move to a long-term care facility for a year or longer, you will violate a key term of the reverse mortgage contract and be forced to pay the loan. Paying for long-term care costs with a reverse mortgage is suitable when you plan to stay in the home.
FAQ
Can a reverse mortgage be terminated if I move out of my home?
Moving out of your home could lead to the termination of your reverse mortgage. Reverse mortgages are designed for seniors who wish to leverage their home equity. Homeowners must maintain their property as their primary residence.
If you decide to move out for the majority of the year, it may trigger the loan to become due and payable. It’s crucial to understand the conditions of your specific reverse mortgage to avoid unintended outcomes.
How does marital status affect a reverse mortgage when one spouse enters a nursing home?
Marital status can greatly influence the terms and conditions of a reverse mortgage. Often, if both spouses are listed as co-borrowers, and one moves to a nursing home, the other spouse can continue living at the property without the loan becoming due.
However, if only one spouse is listed as the borrower, the situation could be more complex when that person moves out. Consult with a financial professional to understand your specific situation.
What are the implications for a co-borrower on a reverse mortgage if one borrower enters a nursing home?
When a co-borrower is on a reverse mortgage, the loan does not typically become due if one borrower moves to a nursing home. The co-borrower can continue to live in and maintain the property as their primary residence.
However, if both borrowers move out of the home for an extended period, it may lead to the loan becoming due.
How long can I stay in a nursing home before my reverse mortgage is affected?
If you are absent from your home for over 12 consecutive months due to physical or mental illness, the lender could declare your loan due and payable, meaning it requires repayment of the full loan balance.
The actual duration might vary based on the terms of your reverse mortgage, so it’s crucial to understand the specifics of your agreement.
What happens to the remaining equity in my home if it’s sold to repay a reverse mortgage after I move to a nursing home?
If your home sells for more than the outstanding reverse mortgage balance, the remaining equity goes to you or your estate. However, if the home sells for less than what is owed, the lender must accept this amount as full payment.
It can’t seek repayment from your other assets. Through this non-recourse feature, you and your heirs are partially protected from any potential downturns in the housing market.
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