Last Updated: January 29, 2024

Assisted living costs continue to rise like everything else, sometimes making it difficult for seniors and their families to pay for long-term care.

Many seniors choose assisted living for safety, security, ease of lifestyle, cuisine, medical care, and amenities. And although it is usually less expensive than aging at home, the cost of assisted living is always a significant factor.

For example, according to Genworth Financial, the 2023 monthly cost for assisted living is $4,750. While that might seem expensive, the average for Home Health services is $6,700.

And while many payment options are available, real estate has become an increasingly popular solution for those looking to pay for assisted living costs.

Below we explore the top 5 ways seniors can use real estate to pay for their assisted living choices.

Overview of Using Real Estate to Pay for Assisted Living

Home for Sale

1. Home Equity Loan or Home Equity Line of Credit (HELOC)

A home equity loan or HELOC allows seniors to borrow against the equity in their home to pay for assisted living costs. This option has lower interest rates than others, and the loan can be paid off over time.

2. Renting Out Your Home

Renting out your home can be an excellent way to generate income to pay for assisted living costs. However, this option has drawbacks, such as the need for property management and potential vacancy.

3. Selling Your Home

Selling your home is a popular option for seniors who want to pay for assisted living costs. Selling your home can provide a lump sum of cash. Still, it also has other considerations, like the emotional impact of leaving a beloved home.

4. Reverse Mortgages

A reverse mortgage allows seniors to borrow against their home equity without making monthly payments. This option provides an ongoing stream of income to pay for assisted living costs, but it also has potential financial risks.

5. Shared Appreciation Mortgages

A shared appreciation mortgage allows seniors to borrow against the equity in their home in exchange for a share of the home’s appreciation.

This option can provide a lump sum of cash without selling the home, but it is sometimes financially complicated.

Using a Home Equity Loan or HELOC

A home equity loan or HELOC allows seniors to borrow against the equity in their home to pay for assisted living costs.

And as the price of everything around you rises, so does your house’s equity. This can give you increased equity that you can use to pay for assisted living without selling your home.

According to AARP, if your house is in Florida, the average equity growth last year was more than 25%, giving the average Florida homeowner more than $180,000 in equity to use.

This option has lower interest rates than many other options, and the loan can be paid off over time.

But seniors should be aware of the potential risks, such as the risk of default and the possibility of losing their home. Depending upon the financial need, equity, type of care, and other factors, a HELOC may be part of the financial answer to paying for assisted living.

Renting Out Your Home

Renting out your home can be an excellent way to generate income to pay for assisted living costs. You get the rental income, and since you are keeping the house, you also benefit from the increased equity every year.

But being a landlord has its challenges, and it is best to leave that to a professional property management company. You pay them a small fee, and they take care of screening the renters’ credit, handling the deposits and rent collection, and fixing the occasional repair.

With proper planning and management, renting out your home can be a viable option for many seniors.

Selling Your Home

Selling your home is a popular option for seniors to pay for assisted living costs. You can get a lump sum at closing and have no more real estate obligations like repairs and maintenance.

And suppose your assisted living financial needs are more urgent. In that case, many reputable companies will give you a quick bridge loan you can repay at closing.

Seniors should seek professional advice to determine if selling their home is the best option for their needs.

Reverse Mortgages

A reverse mortgage allows seniors to borrow against their home equity without making monthly payments.

With a regular mortgage, you make monthly payments to pay down the debt. With reverse mortgages, the lenders pay you, and the debt increases over time. The loan does not settle until the borrower sells their home, moves out, or passes away.

While a HELOC or regular mortgage will give you the funds, they have monthly interest that must be paid back. A reverse mortgage has no monthly out-of-pocket payments at all. But the calculated interest is deducted from the equity balance you have in your home, and the amount of your loan balance gets larger.

There are some downsides to a reverse mortgage. Often the fees are more expensive than other loans. And with a variable rate, you might be giving up more of your equity than you anticipated.

Before getting a reverse mortgage, or any loan, you should seek professional advice to determine if it is best for you and your family.

Shared Appreciation Mortgages

A Shared Appreciation Mortgage allows seniors to borrow against the equity in their home in exchange for a share of the home’s appreciation.

A shared appreciation mortgage is a type of mortgage where the lender provides funds to you, and you agree to share the future appreciation of the house with them. This usually happens when you sell the house or a certain number of years from when you get the funds.

There are three essential parts of this process. The lender loans you money, and you agree to interest payments that accrue. You also agree to give a percentage of equity in the house when it sells.

The advantages are that this funding is done quickly, and credit is usually not an issue. The disadvantages are that the amount of equity you share, loan, and interest repayment is typically larger than a HELOC or regular. And while all financial documents are complex, these are even more so. You definitely want a qualified Florida attorney to read over these documents.

Summary

Happy Senior Couple

Real estate can be a viable solution for seniors who want to pay for assisted living costs.

The top 5 ways to use real estate to pay for assisted living are:

  • Home equity loans or HELOCs.
  • Renting out your home.
  • Selling your home.
  • Reverse mortgages.
  • Shared appreciation mortgages.

But these are complex documents, and it is best to have a Florida real estate or elder care attorney review them with you.

Choosing the right assisted living community and the best way to afford it can seem overwhelming.

Let us help.

We will work with you to find the best home care help or assisted living community for you or your senior loved one. We work daily with assisted living communities, home health care, elder care attorneys, hospitals, rehab facilities, financial and real estate professionals, and more.

We are a Florida-based company with expert knowledge of the Florida senior market. We know how to help with the move to assisted living while ensuring a smooth transition into the new community.

While senior options can seem confusing, this is all we do.

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We have certified staff, professional nurse advocates, and decades of experience in the field.

Senior living should be on your terms, and the choice should always be yours.

Call us, and we will answer all your questions and help you decide what is best for you or your senior loved one.

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