Reverse mortgages make it possible for house-rich but cash-poor elders to use their housing equity to pay for home care while...Read more
Is a Reverse Mortgage Right for You?
- March 2nd, 2017
While reverse mortgages may look like no-lose propositions on the surface, they also have some significant downsides. First, the closing costs for these loans are about double those for conventional mortgages. For example, closing costs on a $110,000 reverse mortgage for a $200,000 home would be more than $10,000. These costs can be financed by the loan itself, but that reduces the money available to you.
Reverse mortgage payments also may affect your eligibility for government benefits, including Medicaid. Generally, these payments will not be counted as income as long as they are spent within the same month that they are received. The unspent balance from a lump-sum reverse mortgage loan could put a borrower over the allowable asset limits for Medicaid or Supplemental Security Income (SSI) eligibility. Even if the loan is taken as monthly payments, the payments could accumulate and push your resources over. In addition, payments from reverse annuity mortgages may be counted as income for purposes of Medicaid and SSI whether or not they are spent within the month they are received. This shouldn't be treated as income, since it simply involves withdrawing equity from one's home, but the state may view it differently since the funds come in a regular monthly check. In any case, you should consult with an elder lawyer in your state if you have any concern about how a reverse mortgage will affect your eligibility for federal benefits.
Local Elder Law Attorneys in Ashburn, VA
Margaret A. O'Reilly, PC
Margaret A. O’Reilly is an estate planning and elder law attorney with over thirty-five years of legal experience. Attorney O’Reilly graduated from Duke University with a degree in psychology, and received her law degree from Northeastern University School of Law in Boston, Massachusetts. For over 15 y...
Needham Mitnick & Pollack, PLC
Susan Pollack served as Chairperson of the Falls Church Senior Citizens Commission from 1997 to 2011 and was on the Executive Board of the Falls Church Education Foundation. She has also served on the Board of Directors of the Alzheimer’s Association of the National Capital Area and is a member of the Arlington B...
The Law Firm of Evan H. Farr, P.C.
In practice since 1987, Fairfax Attorney Evan Farr is widely recognized as one of the leading Elder Law, Estate Planning, and Specials Needs attorneys in Virginia and one of foremost experts in the Country in the field of Medicaid Asset Protection and related Trusts. Evan Farr has been quoted or cited as an expert by n...
Also, bear in mind that if your major objective is to safeguard an inheritance for your children, a reverse mortgage may not be a good idea. As soon as the elderly person (or the survivor of an elderly couple) dies, it will be necessary to sell the home and much -- if not all -- of the sales proceeds will have to be paid to the reverse mortgage lender. But if you have a pressing need for additional income and have no close heirs, or if you do not intend to benefit your children or your children don't particularly want to inherit the house, a reverse mortgage can be a way to supplement income, perhaps without jeopardizing Medicaid eligibility.
Reverse mortgages are complex products and borrowers are advised to acquaint themselves with the different options available and then carefully compare competing loan offerings. You can learn more about reverse mortgages from the AARP.
In addition, the names of FHA-insured lenders are available from the Federal National Mortgage Association (Fannie Mae), (800) 7-FANNIE.
Last Modified: 03/02/2017