A Memory Care or Assisted Living Bridge Loan is a loan specifically designed for persons moving into a senior living residence who intend to pay for it with the sale of their home. While the resident will have the money to pay for their care, that money is currently tied up in their home equity. The bridge loan provides them with a short-term loan (or line of credit) while they sell their home. Once the home is sold, the loan is repaid. These loans are considered a “bridge” because they help get the recipient across a time when money might not be readily available.
They can work as a line of credit or a large lump sum. This is intentional as many assisted living / memory care residences require a move-in or “community fee” as well as monthly payments.
Interest rates for bridge loans are usually higher than with personal loans, because they can be approved for large amounts very quickly. Funds can be paid directly to the assisted living or memory care home, and additional money can also be provided to the individual for normal living expenses.
Bridge loans are currently intended for individuals selling a home or waiting to sell a home. However, lenders are broadening the loans to cover other needs like when an individual is waiting on veteran’s benefits. VA Aid and Attendance benefits can take as long as 9 months to gain approval, but when they are approved, compensation is made retroactively.
A homeowner may be moving into assisted living / memory care immediately and they simply want to cover the costs for a few months while a home is on the market. However, there are other reasons why homeowners may delay selling the home but do not want to delay a move to memory care.
-Waiting on larger market conditions to improve
-Waiting on seasonality as homes rarely sell in the fall but sell quickly in the spring or summer
-Waiting on home improvements to maximize the home’s value
-Adult children simply do not have the time to assist in readying the home for market
-Senior living communities often have a wait list and the potential resident must move in immediately or lose their spot
Bridge loans are approved very quickly, usually within a day or two. In order to demonstrate eligibility for a bridge loan, a person needs to provide the following information:
– Credit score. Banks will ask for a credit score, but having pristine credit is not necessarily required because family members can co-sign for the loan, meaning others may be responsible for paying it back as well.
– Assets. A list of liquid and non-liquid assets would usually include whatever savings someone has in the bank, income, stocks, benefits, etc. (for liquid), and real estate, vehicles, and valuables (non-liquid).
– Future funding source: Bridge loans are short-term, and the lender will want to know what funding will become available later so you can pay off the loan and assume assisted living payments yourself. Most commonly this is proof of home ownership.
Senior living bridge loans are often for large amounts, enough to cover the costs to move, the community entrance fee, and monthly rent or service costs for about a year (though the amount of time will vary depending on your specific situation). With the average cost of assisted living in the U.S. at about $4,000 per month, and $5,000 or more if it’s memory care, plus those additional expenses and fees, a bridge loan amount would typically be something like $100,000, but this number can vary drastically based on several factors. The borrowing range is from $5,000 on the low side to as much as $500,000 on the high end.
Bridge loans typically come as a line of credit rather than a large lump sum, because the money is meant to cover recurring monthly expenses like rent in assisted living. A line of credit is also a good idea because you might not know how long you’ll need the loan for, especially if selling a home.
The costs will vary depending on a number of factors such as where you live, where you are moving to, whether the loan is secured against a home and the lender from whom you borrow.
A typical interest rate on a senior living bridge loan runs from 6% to 10%. Bridge loan interest rates are usually higher than personal loans, closer to interest on a regular credit card. You will probably be charged an origination fee as well (these vary by lender as well), and a one-time processing fee, which will be between 3% to 8% of the total value of the loan.
The financial institution providing the loan will likely add an additional service that makes senior living bridge loans better than personal loans or a normal credit card: They can directly pay the assisted living or memory care home, eliminating the need to handle the bulk of the loaned money at all.
Senior living bridge loans are usually created to be paid back in a lump (balloon payment) sum at the end of the loan, because the recipient is expecting money from benefits or a home sale to come through, and the loan is simply a means of getting to that sale. Low monthly payments on the interest, less than $10 per $1,000 borrowed, would also be part of the arrangement.
Once you’ve decided a bridge loan is the best option to pay for transitioning a loved one into assisted living or memory care, you’ll want to prepare important financial information including credit score, assets, and details on what funding source is expected to come through at the end of the loan (see Eligibility above). Presently there are two bridge loan lenders: Second Act Financial Services and Elderlife Financial Services.
1. Second Act Financial Services specializes in helping seniors move into retirement communities and assisted living homes. Second Act loan managers are experts at coordinating the various factors involved when transitioning into assisted living, including real estate and insurance solutions, as well as benefits including VA pensions. Second Act has a fast approval process and works with assisted living homes to make rent and service payments easy over the life of the loan. Second Act also boasts lower interest rates and origination fees.
2. Elderlife Financial Services has a bridge loan program specifically for moving into assisted living, providing a line of credit that can range from $5,000 to $500,000. Because the money is provided as a line of credit, applicants are approved for a certain amount and then funds are withdrawn as needed. (Lump sum bridge loans are also available.)