subject: Reverse Mortgages And Government Benefits [print this page] Reverse mortgages are growing in popularity as a way to turn home equity into a liquid asset. Before you decide to jump on a reverse mortgage, you have to understand the impact it can have on government benefits.
Reverse Mortgages and Government Benefits
The beauty of home ownership is found in the value of time. The more time you own a house, the more valuable it becomes to you as an asset. On one hand, you're paying off the mortgage over time, which is raising the equity you have in your property. On the other, real estate tends to appreciate with time. This double whammy is what makes home ownership so appealing.
As your grow older and retire, converting your home equity into available cash becomes a concern. Reverse mortgages are touted as a solution. A reverse mortgage is basically a loan against your equity that doesn't have to be repaid till an event occurs, usually the sale of the house. Basically, you have reversed the process of a traditional mortgage. The lender is now offering you cash in exchange for a piece of your home equity. You can get payments in lump sums, month-to-month or through credit lines depending upon the particular package you go with. As time passes, the equity in your home is reduced, but you have a solid and predictable monthly revenue source.
In recent years, the government has attempted to uncover methods for decreasing the amount of benefits they pay out to citizens. One of the aspects they love to use is the asset value you hold. If you have a certain amount of assets, your benefits are decreased or terminated due to the fact the government takes the position you don't need them. An analysis of government benefits is beyond the scope of this article, but reverse mortgages have an effect.
Generally, taking a reverse mortgage on your home will not affect Medicare or social security benefits. This is true, however, just so long as you spend the full amount you obtain every month. The magic number in this equation is $2,000 for single homeowners and $3,000 for couples. The government is constantly playing with benefit issues, so make sure you get up to date info on the situation. You would like to understand what you're getting into, particularly if you are greatly dependent on Medicare for the payment of medical bills.
In general, reverse mortgages don't influence the majority of government benefits. With that being said, make certain to get an informed opinion on exactly what will occur before you agree to a reverse mortgage.
