The reverse mortgage payments may affect your eligibility for U.S. Government benefits, like Medicaid. This is a serious reason, why it is wise to get guidance and to do the financial planning before you take a reverse mortgage loan.
One of the greatest fears, that the American seniors have is, that they must go to the nursing home. The question is not only about losing the privacy, but about the pricetag of the homes. Depending on the location they may easily cost between $ 35.000 – 150.000 an year.
Most people end up to paying nursing home care until their savings have been used. After that they can qualify Medicaid to pick up the costs. It is important to know, that the Medicaid costs are only about 9 % of the nursing home costs.
The financial planning of Medicaid means that you transfer your assets to some other place, so that you are not anymore the owner of those assets. Congress has established a period of ineligibility for Medicaid for the people, who transfer the money. The transfers must be done carefully following the penalty rules of the Congress.
Reverse Mortgage Medicaid
Most people want to live in their old homes, where they have raised children and where all the memories are. However, for many keeping the home and paying the costs is a too heavy burden.
One solution is a special senior product called the reverse mortgage loan. This is the system, which gives a senior cash money, i.e. uses a part of the home equity and transfers that into cash. A senior will keep the ownership and he has not to pay anything back until the home will be sold, a senior will move away or he will die.
This loan permits an older cash-poor, but equity rich home-owner to use their home equity and to pay for the home care until they stay in the home or for nursing home care later on.
In this system, a senior borrows money, usually from the bank and he will get the money either as a lump sum, as monthly payments, as a credit line or as a combination of some or all of these. The amount depends on the interest rates, on the borrower´s age and on the appraised value of the home.
The borrower can use the money how he or she wants. A part can go to the health care, a part to the home repairs, a part to travelling etc.
The popularity of the reverse mortgages is growing and the financial institutions, usually banks, put more marketing power behind these products, because the population is aging.
The reverse mortgage payments can influence your eligibility for the Government benefits, like Medicaid. A general rule is, that the income from the reverse program is not counted as income, if the money will be spent during the same month as it has been received.
If you do not spend the money during the same month, they can accumulate and push your resources over the allowed limits for SSI and Medicaid. The payments from the reverse annuity mortgages can be counted as income, whether they are spent or not during the same month.
In every case it is wise to consult with the federal counselor or with some elder lawyer, who can tell the exact guidance for this issue. The general advice is, that do the planning properly and use experts, before you sign anything!