Can you use home equity to pay for long-term care?
Aging is inevitable. It’s also very expensive. At some point in our lives, seven out of 10 of us will need long-term care. And costs for it are high, rising faster than inflation overall. The annual price tag to stay in a nursing home currently tops more than $100,000 a year, according to Genworth and CareScout’s 2024 Cost of Care Survey. If you need a home health aide or caregiver services, like cooking and cleaning, get ready to fork over $75,000 a year for each. Millions of seniors facing that sticker shock have a powerful asset at their fingertips: their home equity. About $14 trillion in housing wealth (about 40% of all the home equity in the U.S.) is held by homeowners 62 years of age and older, close to a record high, according to the National Reverse Mortgage Lenders Association (NRMLA). While many seniors don’t expect to tap into that wealth to pay for health care or other medical needs, they typically end up doing so. It may be their only option, in fact. How can seniors effectively leverage their home equity in their later years? How can their ownership stake fit into a long-term care plan? Tapping home equity can be a smart move, but only if it’s planned, with the right method in mind. Why you might need to tap home equity Do you have a pension, receive Social Security benefits, or have money tucked aside in savings? If you do, the unfortunate reality is that these income sources may not be enough to cover the rising costs of assisted living or a nursing home — or even an aide to help around the house. “The cost of getting in-home care can be significant, even for those who have planned retirement as best as they could,” says Steve Irwin, president of the NRMLA. “Less than one-third of Americans aged 50 plus have begun saving for long-term care. That’s because they either do not think they will need care or they mistakenly believe they are covered by Medicare or their health insurance policies,” says Jamala Arland, president and CEO of US Life Insurance, Genworth, a company that helps seniors navigate aging. Many older Americans assume that Medicare will pay for their aging-in-place and long-term health needs. Unfortunately not. Medicare will cover home health assistance after a hospital stay and up to a 100-day stay in a skilled nursing facility, but it does not pay for longer stays in nursing homes or assisted living facilities. Nor does it cover caregivers. Get the Michigan Politics newsletter in your inbox. Washington and Lansing, red and blue, we’ve got your government covered. Delivery: DailyYour Email Falling short on savings Medicaid does cover long-term care for individuals – provided they meet strict income and asset requirements. According to the NRMLA, while more than half of older Americans say Medicaid will be a source of support, only a small percentage will actually be eligible. In 2025, single seniors who need to receive nursing home Medicaid can’t have an income in excess of around $2,901 a month (the actual amount varies depending on the state). For married couples applying, it’s $5,802. What about the seniors who have or make “too much” money? They will be forced to spend down their income and assets in order to qualify. But if you think you can just gift large sums of money to other people or charities, or offload some or all of your assets (like your home), think again. In most states, Medicaid has a five-year look-back period for long-term care, in which it reviews all your financial transactions. Any large gifts or asset transfers within that time frame will swiftly put you on the denial list. “It’s not that Medicaid is a terrible program,” says Marc Cohen, co-director of the LeadingAge LTSS Center at UMass Boston, which researches the challenges of the older population. “In fact, it’s a pretty darn good program in many states.” But the fact remains that, in order to receive Medicaid, seniors are put in the position of slowly having to bankrupt themselves, leaving their heirs with nothing when they pass away. Even if they are able to jump through all of those Medicaid hoops, Cohen notes that there are certain services — in particular, home and community-based services — that may not be available because of long waiting lists. Home equity to the rescue That’s why home equity, the primary source of seniors’ wealth, is so critical. The most recent data from the Survey of Consumer Finances, as reported by the Urban Institute, shows the median home equity held by homeowners 65 years and older was $250,000 in 2022. And housing prices and property values have risen even higher since then. In February 2025, home price gains soared to the 19th all-time high in a row, carrying the worth of homeowners’ equity stakes with them. • $313,000 The average mortgage-holding homeowner has, on paper, an equity stake worth $313,000. “About 50% of our customers are using equity from their homes to pay for the cost of care. A lot of them don’t have an alternative,” says Arthur Bretschneider, CEO and founder of Seniorly, a marketplace for senior living facilities. “They’re the folks who have owned homes for many years and they’ve accumulated equity. That’s a blessing. They have it [equity] and now they have to use it.” While many seniors don’t anticipate using homeownership stake to pay for care or other medical needs, they often end up doing so, a Center for Retirement Research at Boston College brief concluded. The brief analyzed a 2024 Greenwald Research survey, in which only one-third (30%) of the respondents said they’d consider using home equity for healthcare expenses. It then analyzed a RAND Health and Retirement Study, focusing on Medicare-covered individuals aged 65-plus, with over $100,000 in investable assets. The year these individuals experienced a long-term healthcare “shock” (major cost), the value of their primary residence declined, implying they borrowed against it to finance the expense. Ways to tap home equity for long-term care There are a number of different ways you can tap