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Successful Aging

MAKE THIS WELL-PLANNED JOURNEY MORE POSSIBLE.

Most older Americans hope to live at home for as long as possible, a practice referred to as "aging in place."

In a recent survey it was found that 3 out of 4 adults 50 and older want to live in their homes and communities as they age.

The good news is that aging in place is "often the most cost-effective" housing solution for older adults, according to Orion Bell, president and CEO of the Benjamin Institute on Aging in Cleveland.

"So, if that's what people want to do, then that's the ideal scenario," says Mr. Bell. "But it's a mistake to think aging in place just happens. Older adults and their families need to be active in creating a plan."

A critical part of that planning, he adds, is money.

Home Modifications to Age in Place

Even minor changes to make a home more accessible can add up quickly. And people who will stay in their homes as they age should expect to incur costs associated with upkeep they will no longer be able to handle, like lawn mowing and housecleaning, as well as the real possibility they will someday require help with personal or medical care.

Sonya Edwards, the broker and executive director of Branches Real Estate, a subsidiary of Benjamin Rose Institute on Aging, says about 75% of people 85 and older report some degree of permanent limitation in performing activities of daily living, such as eating, bathing or dressing.

Medicaid, in some limited situations, will cover personal care assistance; Medicare does not.

Whether it is a one-time expense such as a residential modification, ongoing care or both, Ms. Edwards suggests older homeowners and their families consider using home equity to help cover the cost of staying in the home. 

Home Equity Loans and Home Equity Lines

These are two of the best aging-in-place funding options, according to Ms. Edwards, since either product can be obtained quickly with relatively low upfront costs.

Home equity loans, she says, are ideal for large one-time expenses that exceed 15,000, such as remodeling or pricey home repair projects. The loan is disbursed in one lump sum and payments are fixed over time.

Home equity lines of credit are more like a credit card. The homeowner is given a set credit limit and can withdraw money as needed, which makes these credit lines better for ongoing expenses. 

"So, if you plan to make modifications to the home over a number of years rather than all at once or want to ensure access to cash for unanticipated renovation or care expenses, lines of credit are a good choice, she says.

One drawback to home equity loans and home equity lines of credit, Ms. Edwards notes, are the demanding financial and credit requirements that can be difficult for some homeowners to meet. And monthly payments can be risky for people on a fixed income, particularly when unexpected expenses arise.



"These types of loans are secured by the home," she says. "If they are not paid back, the senior could lose his or her home. Make sure there is a reliable re-payment plan in place and only borrow what is needed."

Pros and Cons of Reverse Mortgages

Reverse mortgages are another alternative. They receive a "bad connotation," says Ms. Edwards, and often for good reason. They are among the costliest loan products and homeowners lose "a lot of their equity" when taking out a reverse loan, she says.

"But they are not all bad," according to Ms. Edwards. Still, she adds, "you have to be in the perfect storm to really make a reverse mortgage work."

Reverse mortgages allow homeowners over age 62 to access a portion of the equity of their home as cash. Borrowers do not make monthly mortgage payments as long they continue to live in the home.

Credit requirements for reverse mortgages are often less strict than conventional home equity loans. That, and the absence of required monthly payments, are the two main advantages. 

But because interest is added to the loan each month — and homeowners are not making payments — the balance on reverse mortgages grows over time. When the last borrower who signed for the reverse mortgage dies or moves out of the home, the loan becomes due.

"Reverse mortgages are complex and complicated," Ms. Edwards says. "I recommend talking to an experienced housing counselor before going down that road."

Older adults may also be able to take advantage of specialized programs designed to cover the cost of home modifications. Many states and municipalities, for example, offer grants and low-cost loans to make homes age-friendly and some organizations provide funds for veterans to adapt their homes at no cost.

Coming to the Right Decision

Ms. Edwards says older adults and their families should also educate themselves about tax and legal issues that affect their housing costs. Homestead credits available in many states, she says, can lower the tax burden and free up money for other expenses.

In some cases, unfortunately, it may not be feasible to age in the home. But Ms. Edwards says exploring financing options is an important step in coming to terms with the need to transition.

Mr. Bell advises that one role of caregivers is to help their loved ones analyze and understand the prospective challenges that may come with aging in place, so they can arrive at an appropriate decision.

"There's a lot less resentment to it and a lot less loss of control to it when it's the senior's decision," he says. "You might be a part of it, you might be the person they bounce ideas off of, you might make suggestions, but it's their lives, it's their decision."

"Ultimately, Ms. Edwards adds, the goal is to feel like you and your family have turned over every rock and exhausted every option before looking at other housing options."