Selling a House to Pay for Senior Living

For families who need to move to senior living before their home sells, a bridge loan, also called bridge financing, can provide temporary access to funds.

Quite simply, bridge loans help families address short-term financial needs. As the name suggests, a bridge loan creates a financial bridge to pay for senior living while waiting for a home to sell or retirement benefits to kick in.

A bridge loan allows homeowners to use available home equity to help cover senior living costs while waiting for their home to sell. Unlike a traditional home sale, bridge financing can provide temporary funds before the sale proceeds are available.

How does a bridge loan work?

• Apply for financing: Determine the amount of credit you may need.
• Access funds: Use the funds as needed to help cover senior living costs.
• Make payments: Make the required payments on the outstanding balance.
• Repay the loan: Repay the balance when your home sells or other expected funds become available.

A reverse mortgage allows eligible homeowners to access some of the equity in their home as cash, monthly payments, or a line of credit.

How does a reverse mortgage work? A reverse mortgage allows eligible homeowners to borrow against their home equity. The amount available depends on factors such as the home’s value, the borrower’s age, and the specific loan program. The loan amount is based on the equity in your home. Funds can be distributed in a lump sum, monthly payments, or as a line of credit.

The home must be the principal residence for at least one person whose name is on the mortgage. So, this type of mortgage is a good option for couples where one partner remains at home while the other moves to senior living for their care needs. When the house is sold, the reverse mortgage is paid back with the proceeds.

To qualify, you must be at least 62, own a house and have some equity in the house. There are a few types of reverse mortgages:

• Home Equity Conversion Mortgage (HECM): A great option for those who need to pay for care or home modifications. This reverse mortgage is federally insured by U.S. Department of Housing and Urban Development (HUD). The Federal Housing Administration (FHA) must approve lenders.
• A proprietary reverse mortgage is usually provided by private lenders to couples with higher-value properties. Proceeds are paid in one lump sum, as opposed to the HECM, which is paid monthly.
• Single-purpose reverse mortgages are usually provided by nonprofit organizations or local governments to help pay for a “single-purpose,” one-time cost, such as real estate taxes or house maintenance.

Consider speaking with a qualified financial professional or elder law attorney who can help you evaluate your options for paying for senior care and understand the potential financial and legal implications.

Selling your home and moving to a senior living community can reduce home maintenance responsibilities while providing opportunities for social engagement, activities, and support. Downsizing services and senior move managers can also help make the transition easier.

Selling a home to pay for senior care can provide funds for move-in fees, monthly senior living costs, and moving expenses. If you are not ready to sell or need funds before the sale closes, options such as bridge financing or a reverse mortgage may provide access to home equity.

The best time to sell a home depends on local market conditions, your financial needs, and how quickly you need to move. Spring and summer may bring more buyers in some markets, while other times of year may offer less competition. If you need to move before your home sells, a bridge loan may provide temporary financing.

If you need to sell your home quickly, you can explore a traditional listing, a cash offer from a real estate investor, or assistance from a senior transition specialist. A bridge loan may also provide temporary funds while you wait for the home sale to close.