Over the years, you made mortgage payments to your lender, reducing the amount you owe and building equity in your home. You might now have a sizable nest egg, but it’s locked into your house.
A reverse mortgage lets you tap into your home’s equity, giving you the cash you need to pay for your living expenses or cover unexpected bills. The Federal Housing Administration (FHA) insures the Home Equity Conversion Mortgage (HECM). It’s the only federally-insured reverse mortgage program available.
A HECM reverse mortgage can help you reach your financial goals but might affect your eligibility for Medicaid and other types of government aid. Learn more about Medicaid eligibility and reverse mortgages and how they might affect you.
Quickly Jump To What You’re Looking For:
- When Are Reverse Mortgages Appropriate?
- Will A Reverse Mortgage Affect Medicaid Benefits?
- What Are Means-Tested Benefits?
- Will A Reverse Mortgage Affect Supplemental Security Income?
- Will A Reverse Mortgage Affect Other Governmental Benefits?
- Reverse Mortgage and Long-Term Care
When Are Reverse Mortgages Appropriate?
To qualify for a HECM Reverse Mortgage, you need to meet certain requirements. For example, you — and your spouse, if you have one — need to be at least 62 years old. You also need to own your home and plan on continuing to live in it. In Florida, you need to attend a counseling session before getting a HECM.
A reverse mortgage can be the right decision for you in several situations:
- You’re single and in good health: If you’re single and don’t expect to need care for medical conditions in the near future, you can use the funds from your HECM to pay down your existing mortgage or to cover your other living expenses.
- You’re single and need in-home care: If you have a health condition or need assistance at home, such as help with your activities of daily living, the proceeds from your HECM can help to cover the cost of home health aide or other assistance.
- You’re married and both in good health: You can get a HECM with your spouse and use the funds from it to pay for everyday expenses or to pay off debts, including your mortgage. At least one of you needs to remain in the home.
- You’re married and one of you needs skilled care: If you’re married and one of you needs to move into a skilled care or long-term care facility, you can still benefit from a HECM. The spouse who is still in fair health will have to remain in the home. The funds from the reverse mortgage can help to pay for the cost of the other spouse’s long-term care.
- You’re married and one or both of you needs in-home care: You can also benefit from a reverse mortgage if both you and your spouse need assistance at home and you plan on remaining in your home. The funds from the HECM can pay for a home health aide or another type of assistant.
Will a Reverse Mortgage Affect Medicaid Benefits?
Medicaid is a public health insurance program for people who have low incomes. It’s not to be confused with Medicare, which is the federal health insurance program primarily for people over the age of 65.
If you meet eligibility requirements, you can qualify for Medicaid at any age. About 20% of people in the U.S. qualify for Medicaid.
Medicaid is a federal program but is administered by individual states. That means the requirements might be slightly different from state to state. In Florida, a two-person household’s maximum income to qualify for Medicaid is $24,353.
If you plan on getting a HECM, you might be concerned that a reverse mortgage will affect your Medicaid benefits, since the proceeds from the HECM can increase your monthly income. Generally, your reverse mortgage won’t keep you from getting Medicaid if you need it, provided you choose the monthly payment option for your HECM rather than the lump sum option.
If you’re concerned that your HECM will affect your benefits, it’s a good idea to discuss it with a counselor before you apply for a reverse mortgage.
What Are Means-Tested Benefits?
Medicaid is an example of a means-tested benefit. A means test examines your financial situation when determining whether you qualify for a program or not. In the case of Medicaid, the state will ask to see proof of your income and request information on your assets.
Medicaid recipients typically need to have an income below the federal poverty line. They also need to have a limited amount of money saved in the bank to qualify.
If you receive enough money from your HECM each month to save part of it, you might soon have enough assets to fail the means test and potentially lose your Medicaid benefits.
Will a Reverse Mortgage Affect Supplemental Security Income?
Depending on your financial circumstances, you or your spouse might also receive supplement security income (SSI) benefits from the government. SSI benefits aren’t the same as Social Security. They are paid for from general tax revenues.
The benefits are for people who are older, disabled or blind and who have almost no or no income.
If you want to receive SSI benefits, your resources need to be less than $2,000 if you’re single or $3,000 if you’re in a couple.
The program doesn’t count the home you live in as a resource, but it might count the income you receive from a reverse mortgage if you put that money in an account and start to save it.
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Will a Reverse Mortgage Affect Other Government Benefits?
Your eligibility for other government benefit programs can also be affected by a HECM. If you’re a veteran who can receive a veteran’s pension, your pension payments can be affected if your net worth increases.
If you’re concerned about the effect a HECM will have on your government benefits, discuss those concerns during your counseling session.
A reverse mortgage counselor can help you weigh the pros and cons of a HECM and evaluate if or how it will affect your benefit eligibility.
Reverse Mortgages and Long-Term Care
Your home needs to be your primary residence if you want to qualify for a reverse mortgage. If you move into a nursing home permanently, you’ll need to pay back the amount borrowed through the reverse mortgage.
A permanent move is longer than 12 months. If you are only in the nursing home for six months, then return to your primary residence, you won’t have to pay back the reverse mortgage right away.
You can continue to enjoy the benefits of your HECM if your spouse moves to a nursing home and you stay in the home, or the reverse. At least one person from a married couple needs to remain in the home.
If you need to or decide to move to a nursing home permanently, you can use the proceeds from the sale of your primary residence to pay off the HECM.
Learn More About Reverse Mortgages and Medicaid Eligibility From Senior Lending Corporation
If you’re interested in a reverse mortgage but are concerned about the impact it will have on Medicaid or other government benefits you receive, talk to an expert at Senior Lending Corporation today.