What Is A Reverse Mortgage?
How is it paid to you?
A reverse mortgage enables you to turn the value of your home into cash that you can use for any purpose. A reverse mortgage can be custom tailored to your needs.
You can receive your reverse mortgage cash:
- In a single lump sum at closing. (This is the only option with a fixed rate loan).
- As a regular monthly cash advance / payment for as long as you live in your home.
- Held in reserve as a credit line account that lets you customize when and how much is paid to you - changing over time as your needs change.
- As a combination of these three payment methods (not applicable for fixed rate loans).
Borrowers can change payment options at any time, subject to a small fee.
Seniors receiving Medicaid and SSI benefits should be careful before choosing a lump sum payment. Proceeds received from a reverse mortgage may not affect most Social Security or Medicare benefits. However, Medicaid and SSI benefits may be affected if you don’t use your proceeds from the reverse mortgage immediately. The money you keep in the bank is counted as an asset. As such, if you receive income from your reverse mortgage and it is not used, you may exceed the maximum assets allowable. At that point you would be ineligible to receive those benefits.
This is why seniors on Medicaid tend to choose to receive the reverse mortgage proceeds as a line of credit, because they can take money out on an “as needed” basis. Clearly, if money is taken out “as needed”, it would be spent immediately and not counted as an asset. You should consult with your financial advisor or an Elder Care Attorney for further information and guidance.
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