Assisted Living and Home Care Bridge Loans from Elderlife Financial

Page Reviewed / Updated - April 14, 2009

Program Overview of Eldercare Bridge Loans

As of June 2018, Elderlife Financial is the only organization offering a loan product that is specifically designed as a Senior Living Bridge Loan. The “Elderlife Bridge Loan” was created to help seniors and their families with the cost of assisted living, home care or skilled nursing on a short-term basis, typically for periods ranging up to 12 months, but sometimes longer.

With a bridge loan, funds are sent directly to care providers such as assisted living communities or home care agencies.  In addition to convenience, this also helps protect the senior from a misuse of funds. Some cash can also be provided directly to the family to help pay for relocation, incidental and unexpected costs.  The loan is structured as a line of credit, and the interest rate is variable and tied to the prime rate. 

When to Use a Bridge Loan

Elderlife's loan product is designed to serve as a bridge until more permanent financial resources can be arranged.  Follows are several examples of situations in which using an eldercare loan product makes economic sense.

• When Entering Assisted Living - The costs of moving into assisted living can be significant considering monthly fees, community (entrance) fees and relocation expenses. A short-term loan gives a family the flexibility to absorb these costs and ease the burden until other funds become available over the next 6, 12 or even 18 months.

• When Waiting for Veterans Benefits - The VA Pension for war-time veterans, when coupled with the additional Aid and Attendance benefit, can provide $1,000s / month toward the cost of assisted living or home care. However, the average time for application processing is 9 months and many families wait as long as 18 months to begin receiving benefits. This pension is retro-active, so a bridge loan works well to cover the waiting period.

• When Selling a Home - It can take many months to prepare a home for sale, find the right buyer, and arrange financing. A bridge loan allows families the time to receive the best offer for the home rather than rushing a sale simply to have funds available for senior care.

• As an Alternative to a Reverse Mortgage - Reverse mortgages are a popular way to finance long term care, provided at least one homeowner remains in the home. Should both owners move from the home to assisted living, a reverse mortgage is not an option. Additionally, an AARP study finds reverse mortgages make economic sense for homeowners who intend to use the proceeds for at least 5 years. A bridge loan makes sense for shorter loan periods.

Program Details / Pros & Cons

The Elderlife Line of Credit is a line of credit, so it works the same way a credit card does. A loan is approved for a total amount, but borrowers can draw on funds as needed, and only pay interest on the amount used. Therefore, a fairly strong credit score is required for approval if there is a single borrower. However, the loan is also designed to allow for multiple co-borrowers to share the cost of paying for the senior’s care. Having multiple co-borrowers lessens the need for a strong credit score from any one borrower, since there are multiple individuals to share the risk. The more co-borrowers, the easier it is to be approved, even if one co-borrower has poor credit. These loans also have an extremely fast approval process. Families can be approved within 24 hours.

The largest drawback of this option is the interest rate of the loan. By some, it may be considered to be high. However, this is a relative statement. When compared to a home equity loan, the interest rate might be high, but when compared to a credit card or personal loan, it is very reasonable. Loans can be repaid at any time without penalty. Furthermore, some assisted living communities will pay the interest on the loan as an incentive for the senior moving into their community. Essentially, this allows families to borrow money at no cost.

A final benefit of a bridge loan is that it can eliminate complexity when applying for VA pensions or Medicaid. This is especially relevant if the alternative to a bridge loan is a family loan. VA pensions and Medicaid consider the applicant's income and past asset transfers as eligibility factors. If not very carefully structured and documented, money accepted from family members to pay for care can be counted as income. This can hurt a VA application or result in a Medicaid denial. Monies repaid to family members can be considered an illegal asset transfer by Medicaid. The federal government and the Department of Veterans Affairs recognize Elderlife's financial product as a loan. Relative to a family loan, this can reduce complexity in the application process. If one is considering a VA pension or Medicaid in the future, it is strongly recommended they consult with a planning expert.

Eligibility Requirements for Elderlife's Bridge Loan

Credit Scores – Typically, a bridge loan is made with multiple family members as co-applicants. Therefore, while credit scores are considered, a low credit score from any one co-applicant can be offset by the others. Aside from credit scores, other consideration factors include liquid assets, income and home equity.

Alternative Funding Source - As the bridge loan is intended as a short-term solution, the lender will want to know what other source of funding will become available. Most commonly, this will be a lump sum from the sale of a home, or a lump-sum retroactive payback from veteran’s pension benefits.

Factors NOT Considered - Several other factors are worth mentioning, in that they do not impact eligibility for senior care bridge loans. Since the loan is typically given to the family, and not the individual in need of care, age is not a factor in eligibility. Furthermore, the health condition of the applicant is not relevant to the approval process. Also, marital status does not impact eligibility. Veteran status is only relevant to loan eligibility if the individual in need of care is waiting for approval of veterans’ benefits.

Benefit Details / Sample Repayment Table

Most loans are provided as a line of credit but in some circumstances, can be provided as a lump sum. Typical credit lines are from $20,000 to $30,000. Loan payments are made directly from the account to the care providers, which can include home care, assisted living, Alzheimer's residences, skilled nursing homes, and even adult day care providers.

These loans are intended as a bridge until an alternative source of funding becomes available, such as selling a home or receiving a VA pension, and the monthly payments are structured to be very low. The 9-month sample repayment table below assumes the borrower requires a loan of $3,000 each month to pay for care. This schedule assumes a monthly, interest-only payment of about $8.00 per $1,000 borrowed.