Aging is inevitable. It’s also very expensive.
At some point in our lives, seven out of ten of us need long-term care. Costs are high and are rising faster than overall inflation. According to Genworth and Carescout’s 2024 cost-of-care survey, the annual price for staying in a nursing home is currently over $100,000 a year. If you need a home hygiene aide or caregiver service, such as cooking or cleaning, be prepared to put more than $75,000 in each year.
Millions of seniors facing that sticker shock have strong assets at their home equity, their fingertips. About $14 trillion Housing Wealth (Approximately 40% of all home equity in the United States) According to the National Association of Reverse Mortgage Lenders (NRMLA), homeowners age 62 and older are held by homeowners who are close to record highs. Many older people don’t expect to use their wealth to pay for healthcare or other medical needs, but they usually do. In fact, it may be their only option.
How can older people effectively utilize home equity in later years? How can their ownership fit into a long-term care plan? Tapping home equity can be a sensible move, but only if planned with the right method in mind.
Why should I tap Home Equity?
Are you receiving a pension or receive it social security Are you throwing away your money for profit or savings? If so, the unfortunate reality is that these sources of income may not be enough to cover life therapy, rising nursing homes, or even aides to help around the home. “We’re looking forward to seeing you in the future,” said Steve Irwin, president of NRMLA.
“Less than a third of 50-year-old Americans have begun saving for long-term care because they don’t think they need care or they mistakenly believe they are covered. Medicare Or their health insurance policy, says Jamala Arland, president and CEO of US Life Insurance at Genworth, a company that helps seniors navigate aging.
Many older Americans assume that Medicare will pay for places where they age and long-term care. Unfortunately, that’s not the case. Medicare covers home health assistance after 100 days of stay in a skilled nursing facility, but does not pay for long stays in nursing homes or living facilities. It’s not covered by caregivers either.
It’s lacking in savings
Medicaid I’ll do it Covers individual long-term care – provided they meet strict income and assets requirements. According to the NRMLA, more than half of older Americans say Medicaid is the source of support, but in reality, only a small percentage qualifies. In 2025, a single senior who needs to receive Medicaid for nursing homes will not earn more than $2,901 per month (actual amounts vary by state). For married couples applying, it costs $5,802.
What about seniors who have “too much” money or earn money? They are forced to use their income and assets to qualify. But if you think you can give a large amount of money to someone else or charity, or if you can offload part or all of your home (like yours), think again. In most states, Medicaid has a five-year lookback period for long-term care. There we review all financial transactions. If there is a big gift or transfer of assets within that time frame, it will quickly appear on your rejection list.
“Medicaid is not a terrible program,” says Mark Cohen, co-director of UMass Boston’s Liedage LTSS Center, which studies the challenges of older adults. “In fact, it’s a pretty good program in many states.” However, the fact remains that in order to receive Medicaid, older people are placed in the position that they must slowly insolvent themselves, leaving nothing to their heirs when they die.
However, even if they could jump over all of these Medicaid hoops, Cohen points out that there are certain services that are not available due to the long waiting list, especially home and community-based services.
Home Equity to Rescue
That’s the reason Home Equitythe main source of wealth for the elderly is very important. As reported by the Urban Institute, the latest data from the Consumer Financial Survey shows that the central home capital held by homeowners over the age of 65 was $250,000 in 2022. Home prices Since then, the property values have risen even further. In February 2025, home prices rose to its 19th high, bringing a stake in the homeowner’s stock.
“Around 50% of our customers use fairness from home to pay for the cost of care. Many people don’t have an alternative,” says Arthur Brezschneider, CEO and founder of senior living facilities market. “They are people who have owned homes for many years, and they have accumulated fairness. It’s a blessing. They have it (fair), and now they have to use it.”
Many seniors don’t expect to use homeownership stocks to pay for care or other medical needs, but they often do, concluded the Retirement Research Center at Boston College Brief. This overview analyzed Greenwald’s research survey in 2024. In the survey, all seniors, only one-third of respondents, say they use home equity for their health care needs. He then focused on the RAND Health and Retirement Study, focusing on Medicare-covered individuals aged 65 and over, earning over $100,000 in investable assets. In the years they experienced a long-term health care “shock” (major costs), the value of their main residence fell, implying that they borrowed against it to lend the costs.
How to tap Home Equity for long-term care
There are various ways you can utilize the fairness of your home to pay for long-term home care. Each has its advantages and disadvantages.
Reverse mortgage
a Reverse mortgage It is often the first home equity tapping tool that comes to mind when thinking about the elderly and long-term care. After all, most of these loans are specifically aimed at them as they qualify for ages 62 and up (some people take 55-year-olds).
One of the benefits of reverse mortgages is that you don’t have to make monthly payments. However, while you are alive, the loan does not require repayment, but you will need to repay it when the borrower dies or moves. This means your heir may need to pay a large sum of money to maintain the home.
Generally, you need at least 50% stake in your home and you need to live there, so this is not an option for retirees who want to transition to a senior residential facility. Reverse mortgages can also affect your ability to qualify for programs such as Medicaid. You should attend a Housing and Urban Development Approval Counseling Session to ensure you understand what you are obsessed with.
Home Equity Loan and Helock
a Home Equity Loan or Home Equity Credit (HELOC) It’s a wise way for seniors to use home equity to pay for long-term expenses. However, if you can’t keep up with your payments, budgeting is very important as your home is on the line.
Home equity loans usually have a fixed interest rate. They can easily manage as monthly payments become predictable. However, if you need more funds, you will need to get a new loan.
With regard to HELOCS, the flexibility to withdraw funds makes it ideal for ongoing long-term or unexpected costs. However, monthly payments may vary depending on the rate of interest rate fluctuations. This is difficult for bond seniors. Additionally, older people have a higher debt-to-income ratio on average, so finding HELOC approval is often more difficult, according to a study by the Urban Research Institute.
Cash-out refinance
For seniors looking for lump sum to pay for long-term care, Cash-out refinance It might be the answer. The Refi rate is lower compared to Home Equity Loan or HELOC. But even so, in today’s environment, cash-out refis may not be the most cost-effective way to take advantage of your home equity.
Interest rates have probably risen since the first mortgage. According to Freddie Mac, more than half of the baby boomers have repaid their mortgages of less than 4%. Also, you are getting a bigger loan. This means that monthly payments will increase. If you choose to use a new mortgage for the long term, you will be charged more interest overall. All of these can be a financial burden for older people.
Like Helocs, it can be difficult to qualify. A 2023 Federal Reserve Bank of Philadelphia Working Paper found that getting mortgage approval becomes more difficult as people age.
Selling a house
Home sales are the oldest way to convert your stock into cash. And the most profitable: The housing market is highly regarded every year. Every quarter since 2012, seniors have given the possibility of leaving home sales on an organized amount. If you still have a mortgage, Selling a house You can eliminate monthly mortgage payments and free up funds for long-term care. Revenues can be used to buy smaller, more manageable homes or move them to support facilities.
However, depending on your location, finding your next home can be expensive or competitive. Selling homes and receiving large sums can also affect eligibility for Medicaid and other government programs.
learn more: Home Equity Strategy for Older Homeowners
How seniors use home equity
Home equity funds can be used for almost anything. Some seniors may need additional funds to pay for long-term care outside the home, while others may need it to manage their daily lives while still living at home. Some common uses include:
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Changes to the aging location of the house: installation of handrails or lamps, walk-in showers, non-slip floors, first-floor suites, stairs lifts, or other expensive renovations that make life easier for seniors. If you use the funds to significantly improve your home’s livability in this way, you may be able to deduct interest on your home equity loan or HELOC. Also, these modifications will increase the value of your home if done well.
- To pay out-of-pocket expenses not covered by major insurance or Medicare, you are paying certain medications, treatments, or caregivers’ wages.
- To earn a down payment at a home within a senior community, or at a home within the senior community, funds to meet monthly expenses for nursing homes or supplemental facilities.
- Consolidate high profit debts, like good credit card balances. Interest rates on home equity loans tend to be lower than those on credit cards. This strategy frees up cash flow for seniors.
Is it a good idea to use home equity for long-term care?
Your home is more than just a place to live. This is a financial asset that can provide security when you need it most. However, there are risks and drawbacks to using home equity, depending on the options you choose. If you can’t keep up with your monthly bill (especially using Helocs, where interest rates fluctuate), you may face foreclosure. You may take the heirs: tapping on home equity will dilute your ownership and they will be added to paying off the debt when they inherit.
Furthermore, getting into debt to handle ongoing daily expenses is rarely a good strategy. If that’s what you need stock funds, remember that it will be a StopGap solution at best.
Still, for older people who “may have wealth but have poor cash flow,” Bretschneider says, it’s a solution. “Frankly, you’ve achieved the fairness you built up. Why don’t you think about aging it well into the next stage of your life, or at least part of it, and getting good results?”
He speaks from personal experience. In 2024, Bretschneider’s 73-year-old father had decided on the next stage in his life. He has lived alone in a 3,000-square-foot home in California since his wife passed away in 2018. He had little savings and was burdened with high utility and homeowner insurance costs. After seeing a variety of options, including home equity loans and reverse mortgages, he ultimately decided to move to the advanced living community. His home is worth about seven people, has been renovated and will eventually be sold. After sale, Bretschneider and his sister invest the proceeds to fund their father’s continued care.
Bretschneider is correct. You can’t always predict the outcome, but you can always prepare. My older mother, who passed away in 2022, had never made a long-term care plan. But my husband and I have owned a house for over 20 years. We have retirement savings and other assets, but we are also grateful to be able to count on our home in case we need it. It may work for you too, but whatever the safety net you choose, make sure you started weaving it well before your older years arrive.
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