Using Your Home Equity to Pay for Senior Living

Downsizing from your current home can be a difficult decision for seniors. But it can also open up all sorts of opportunities. For instance, selling your home can free up your home equity, meaning that you can use proceeds from the sale to help pay for future living expenses and other priorities in your life.

If you’re moving to a senior living community, some of that money will pay for the monthly cost of living there. If there’s money left over, you may choose to do any number of things with it like paying for travel or other big-ticket items or giving some to family. It’s entirely up to you.

How far will your home equity go?

But before parting with any of that money, you’ll want to get a clear idea of how far your current home equity will go after you sell your home. Part of that calculation is estimating what you need to set aside for future living expenses. Here’s where you may want to consult a financial advisor. They can help you come up with a financial plan that anticipates what those future expenses might be, factors in your current assets and retirement income, and identifies possible tax considerations.

When estimating your future senior living expenses, consider what’s included in your monthly payments and what isn’t. Some senior living communities may have a basic care package that’s included in the monthly fee. Additional care may be available for an extra fee. Although you may not need additional care now, you may want to include it in your calculation in the event you need it at some point in the future.

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As an example, here’s what the monthly fee at a Sinceri senior living community gets you: 

  • ApartmentSuite with utilities
  • Access to 24-hour care
  • Medication management 
  • Meals 
  • Laundry
  • Activities
  • Transportation

Once you’re confident that you’ve accounted for all possible future living expenses, it will be easier for you and your financial advisor to understand what flexibility you have when it comes to spending or reinvesting the proceeds from the sale of your current home.

What if selling your home isn’t an option?

That’s all very good if you’re able to sell your current home, but what if that’s not an option? Maybe your spouse requires memory care, but you intend to keep living in your current home. What do you do then?

In this sort of situation, you may want to consider a reverse mortgage. A reverse mortgage is a loan that allows you to convert your home equity into cash income with no monthly mortgage payments. Instead, the entire loan balance becomes due and payable when the borrower dies, moves away permanently, or sells the home.

But if you do consider this option, be sure to deal with a reputable financial institution. There are reverse mortgage scams that target seniors.

Other funding sources besides home equity

Home equity is the only source of funds that can help you pay for senior living. To learn more, check out our article on the topic or our “Family Guide to Funding Senior Care & Housing”.

download our family funding guide

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