Long-Term Care Planning: Reverse Mortgages

In recent years, reverse mortgages have become a popular vehicle for seniors to supplement their income or to be able to pay for rising health care costs. However, before applying for a reverse mortgage, there are several issues that a homeowner should consider and consult with an attorney about.

First, reverse mortgage payments may affect your eligibility for government benefits such as Medicaid or SSI. Two options for receiving a reverse mortgage are a lump sum payment or what are called reverse annuity payments; both options could disqualify you by pushing your resources over the income and asset eligibility limit. Currently, for Medicaid, the asset limit is $2,000 for a single person and $3,000 for a married couple. For income, the eligibility limit is $2,163 for an individual and $4,326 for a couple. If you are on Medicaid or SSI, it is imperative that you consult an attorney before applying for a reverse mortgage or you could lose vitally important government benefits for an extended period of time.

Second, the closing costs for a reverse mortgage loan are about double the closing costs for a conventional loan. While these costs can typically be financed by the loan itself, it reduces the money available to you.

Third, a homeowner who takes out a reverse mortgage loan will still be responsible for association fees, property taxes, and property insurance. All of these should be considered before applying because once the equity in the home is exhausted by the reverse mortgage, the senior is still responsible for all these fees.

Finally, homeowners should especially be careful of which company they choose for their reverse mortgage. Currently, there is only one reverse mortgage program insured by the Federal Housing Administration—the Home Equity Conversion Mortgage (HECM). For more in-depth information about reverse mortgages, please visit the following links:

AARP Reverse Mortgages
National Center for Home Equity Conversion

If you are in need of legal services and would like to schedule a consultation, please call us at (954) 256-9192 or e-mail us at office@jajlawfirm.comm.

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