Just like first-time homebuyers and renters, plenty of families struggle to pay for long-term senior care.
Today, let’s explore the various types of assisted living facilities and their costs. And, most importantly, what are the available financing options for these services.
First, consider the senior universe. The United States has a population of roughly 340 million seniors, of which 58 million are 65 and older (more than 17%). California’s population of nearly 40 million has a 65-and-over population of nearly 6 million people (that’s 15%).
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Overall, the U.S. life expectancy is 77.5 years, according to the Center for Disease Control.
Almost 70% of people turning 65 today will need some type of long-term care services and support, according to the Administration for Community Living. That’s a huge percentage.
Next, consider the types of assisted living support and their costs in California.
There are 13,536 total assisted living communities (excluding nursing homes, which are more commonly used for short-term physical rehabilitation), according to the National Center for Assisted Living. The total bed count is 243,177.
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Rose Evans, a senior placement consultant at Senior Navigation Solutions, helps break down the options:
1. Continuous Care Retirement Community or CCRC: It’s a buy in, similar to buying real estate, but you don’t own the actual structure. Buy-in costs can be $600,000 or more.
2. Board and care with regular staff: This looks like a home but has more ingress and egress points for safety. Board and care is usually licensed for six residents with two caregivers. The cost can run from $5,000 to $7,000 per month.
Board and care awake staff means a caregiver is paid to stay awake at night. Estimated average cost for a single room is from $6,500 to $8,500. This is inclusive of all care costs, except incontinent supplies.
3. Assisted living facilities: These complexes come with an average monthly price of $5,450 for a studio, $6,620 for a one-bedroom and $8,785 for a two-bedroom. Care costs associated with these units cost extra.
4. Standalone memory care and attached to assisted living facilities: These facilities run from $8,000 to $9,050 monthly for a private room and $6,000 to $13,500 for a shared room. These offer basic care, excluding incontinent supplies.
Another way to provide care is to age in place through a home-care agency. The agency provides an associate to assist the individual in their own home. The cost runs approximately $30-$45 hourly, according to Marshall Northcott, owner and operations manager at Assisting Hands Dana Point. Four hours per day is the minimum requirement, up to 24 hours a day.
Another option is in-home support services or IHSS for low-income clients, Northcott says.
Let’s assume that it costs $6,000 per month for your loved one to receive long-term care at a senior living facility. That’s $72,000 per year. Over five years it adds up to a staggering $360,000.
Now, let’s explore ways to finance the monthly cost, starting with homeowners.
1. First and foremost, you can sell real estate assets in order to create long-term housing funds. Maybe it’s the senior’s home or a family member’s.
2. There’s also a reverse mortgage, a Federal Housing Agency home loan allowing borrowers age 62 and older to pull equity out of their primary home. There is another non-FHA reverse mortgage program allowing borrowers 55 and older to accomplish the same thing. No house payments are required other than property taxes and insurance. Owner-occupancy is key for at least one of the spouses. The other spouse can live in an assisted living setting.
3. A home equity line of credit is a second lien against your property. It’s similar to how a credit card works. You can borrow and pay back the debt in the first 10 years. After 10 years, you must pay off the amortizing loan balance over the next 20 years. You can qualify in a traditional manner with tax returns. Or self-employed borrowers can qualify using bank statements.
4. A cash-out refinance allows a homeowner to pull equity out to pay for senior care.
5. A cash-out refinance in which the owner pays back only the interest for the first 10 years. This significantly reduces the monthly payment when the mortgage is not amortized.
Other ways to finance senior care and living arrangements:
6. Long-term care insurance
7. Veterans Administration benefits
8. Medicaid for those with limited income and assets
9. Personal savings
10. Cashing in a life insurance policy
Plan ahead financially speaking if you can. We just don’t know if or when long-term assisted living support will be needed. You don’t want to be a burden to your children.
Freddie Mac rate news
The 30-year fixed rate averaged 6.65%, 2 basis points higher than last week. The 15-year fixed rate averaged 5.8%, 1 basis point higher than last week.
The Mortgage Bankers Association reported an 11.2% mortgage application increase compared with one week ago.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $806,500 loan, last year’s payment was $49 more than this week’s payment of $5,177.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.75%, a 15-year conventional at 5.5%, a 30-year conventional at 6.25%, a 15-year conventional high balance at 5.875% ($806,501 to $1,209,750 in LA and OC and $806,501 to $1,077,550 in San Diego), a 30-year-high balance conventional at 6.625% and a jumbo 30-year fixed at 6.5%.
Eye-catcher loan program of the week: A 40-year fixed rate mortgage, interest-only for the first 10 years at 6.75% with 1 point cost.
Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or [email protected].
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