Elderly Parents Have No Money but Own a House

Are There Benefits or Savings You Haven't Claimed Yet?

Before anyone looks at the house, it helps to know whether a parent already has access to money or help that has gone unclaimed. Some older homeowners are not receiving every benefit open to them. Closing that gap can reduce how much equity is needed, or remove the need entirely.

Categories worth reviewing include:

• Social Security, including when benefits were claimed
• Supplemental Security Income (SSI)
• Energy help through the Low Income Home Energy Assistance Program (LIHEAP) and local utility programs
• Food assistance such as SNAP

Medicare Savings Programs can help pay Medicare premiums and, for those who qualify, deductibles, coinsurance and copayments. Each state runs its own programs, and applications go through the state. Medicare.gov notes that income and resource limits go up each year and that some states count income or resources differently.

The Consumer Financial Protection Bureau notes that state and local programs can help with utilities, fuel and home repairs. It adds that many localities have property tax programs and that the county or town tax office can explain them.

A local Area Agency on Aging is part of the national Aging Network. It can help a family find services and benefits nearby. The federal Eldercare Locator lists these agencies.

Ways to Turn Home Equity Into Money You Can Use

Once the budget is clear, the remaining gap is what any equity option would need to fill. The options below are a menu, not a ranking. Which one fits depends on the homeowner's age, health, income, how long they plan to stay and the family's circumstances. A broader walk-through of money out of your house without selling compares the borrowing choices side by side.

Selling or downsizing. The homeowner sells, pays off any mortgage and uses what remains for living costs or care. This trades the home for cash and ends the costs of owning it. A sale can raise capital gains questions, which a tax professional can answer.

Renting a room or an accessory dwelling unit. An accessory dwelling unit is a small separate home on the same lot. Renting space brings in money without selling. It also brings landlord duties, and rental income may affect some benefit programs; the agency running each benefit can explain how.

Home equity loan. This is a lump-sum loan secured by the home and repaid in fixed monthly installments. Interest runs from the start. Approval depends on income and credit.

Home equity line of credit (HELOC). A HELOC is a revolving credit line secured by the home. The borrower draws as needed up to a limit. It usually carries a variable rate and monthly payments, and it requires income qualification.

Cash-out refinance. This replaces the current mortgage with a larger one and pays the difference in cash. The monthly payment typically rises, and income qualification applies.

Reverse mortgage. This option works differently from the others and is explained in the next section.

How a Reverse Mortgage Works — and What It Requires

A reverse mortgage draws attention because it does not need a monthly mortgage payment. That feature comes with costs and duties.

The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage insured by the federal government. It is available only through a lender approved by the Federal Housing Administration (FHA), which is part of HUD. The CFPB describes it as a home loan only for homeowners who are 62 and older. Title to the home stays in the owner's name.

The borrower makes no monthly mortgage payment. Instead, interest and fees are added to the loan balance each month, so the amount owed grows and the owner's equity shrinks over time. The borrower must live in the home as a principal residence, pay property taxes and homeowners insurance, and keep the house in good condition. These are conditions of the loan. The CFPB notes that the loan may come due sooner if they are not met. The CFPB's repayment guidance states that a HECM comes due when the last surviving borrower or eligible non-borrowing spouse dies, sells the home or no longer lives there as a principal residence.

The amount available varies by borrower. According to HUD, it depends on the age of the youngest borrower or eligible non-borrowing spouse, the current interest rate, and the lesser of the appraised value, the sales price or the HECM FHA mortgage limit. HUD publishes the current limit. The loan's terms set how a lender may pay out money, in forms such as a lump sum, a line of credit or monthly payments, subject to lender approval. Federal rules limit the origination fee, and the lender discloses it.

Before a HECM, the borrower must meet with a counselor from a HUD-approved counseling agency. HUD lists counselors on its HECM Counselor Roster and by phone at (800) 569-4287. The FTC states that the counselor must explain the loan's costs, its financial implications and alternatives.

Understanding what a reverse mortgage requires, not just what it offers, is what lets a family weigh it honestly.

Medicaid, Long-Term Care, and the House

The question behind many searches is quieter: if a parent needs nursing home care, what happens to the house? Medicaid can cover long-term care, including nursing home care, for people who meet its income and asset rules. Each state sets many of those rules, within federal limits. Under 42 U.S.C. § 1396p(f), a person is not eligible for nursing home or other long-term care coverage if their home equity is above a federal limit, which is adjusted each year and which a state may set higher, unless a spouse, a child under 21 or a blind or disabled child lawfully lives in the home. The state Medicaid agency or an elder law attorney can explain how a home is counted.

Federal law limits liens on the home during life. Under 42 U.S.C. § 1396p, a state generally may not place a lien on a living person's property for Medicaid paid on their behalf. There are exceptions, including a court judgment for benefits paid incorrectly and certain long-term patients the state finds cannot be expected to return home. Even then, no lien may be placed on the home while a spouse, a child under 21 or a blind or disabled child, or a sibling who has an equity interest in the home and lived there for at least one year immediately before the admission lawfully lives there.

The same statute requires estate recovery. That means the state seeks repayment from a deceased recipient's estate for certain care, including for people who were 55 or older when they received nursing facility and home and community-based services. Recovery may happen only after the surviving spouse dies, and only when no child under 21, blind or disabled survives. States must also have hardship waivers.

Selling, borrowing or transferring the home can affect both eligibility and recovery. An elder law attorney can explain how a specific state applies these rules.

How to Bring Up Money and the House With a Parent

For an adult child, the hardest part may be raising the subject at all. A parent may feel embarrassed, fear losing independence, or distrust loan products after years of pushy advertising. The CFPB has warned about ads that falsely promise veterans special deals or imply VA approval.

One approach starts with the parent's goals instead of products. Does the parent want to stay home, get help with care, or avoid relying on the children? Starting there keeps the conversation about the parent's life, not about a loan.

Gathering information beforehand can ease the conversation. Knowing what each option involves and what to ask makes it easier to listen. Families weighing high home equity but low monthly income often find the facts less alarming than they expected.

A neutral third party can help. A HUD-approved housing counselor or a nonprofit elder care adviser can explain options without a stake in the outcome. Some parents find it easier to hear the same facts from someone outside the family.

When the House Is the Only Asset: What Families Work Out

Families with one main asset tend to look at a handful of practical arrangements. None is right for every family.

• Some relatives pay toward living costs with an understanding about a future share of the estate.
• A parent moves in with an adult child, and the house is rented or sold.
• A family member buys the home from the parent at fair market value.
• A life estate deed lets the parent keep the right to live in the home for life while future ownership passes to someone else.

Each arrangement has legal, tax and Medicaid effects that vary by state. Transfers matter most. Under 42 U.S.C. § 1396p, when a person or their spouse gives away assets for less than fair market value within a set look-back window, the person can be ineligible for certain long-term care for a period. An elder law attorney can review any plan that moves ownership of the home.

What works depends on the parent's health and care needs, the family's relationships and state law.

Any arrangement that moves ownership of the home carries legal and Medicaid consequences that vary by state, so getting the details right matters.