Reverse Mortgages, Insurance, and Medicaid
There has been quite a bit of attention paid in the media lately to the relationship between reverse mortgage payments and Medicaid availability. Because much of the information obtained by the media is hearsay or conjecture, this article intends to weed out fact from fiction.
According to one website dedicated to lending information, “if you receive Medicaid, any reverse mortgage proceeds that you take delivery of must be utilized right away.”
More specifically, the site says that,” any retained funds will count as an asset and may affect your Medicaid eligibility.” This means if a homeowner took out a reverse equity mortgage and decided on a lump sum of, say $15,000, they would have to spend that money immediately. If they failed to do so, that money left would count as a liquid asset and affect their Medicaid eligibility.
Based on current national limits on liquid assets for Medicaid eligibility, (the limits being $2,000 for an individual, and $3,000 for a couple, the homeowner would then be deemed ineligible for Medicaid and forgo their medical benefits.
Does this mean that homeowners currently on Medicaid should avoid a reverse equity mortgage? Not necessarily.
When senior homeowners decide to take out a reverse equity mortgage, receiving a lump sum is only one of several options. The loan monies can also be disbursed in a variety of payment options:
1. Tenure: fixed, equal monthly payments that will continue for as long as at least one borrower is living in the property as a main residence
2. Term: equal monthly payments for a predetermined period of time
3. Line of Credit: funds are available for disbursement in lump sums or installments on dates and in amounts at the borrower’s discretion until the credit line is depleted
For individuals who currently receive Medicaid, the “Line of Credit,” option is the most practical and palpable disbursement option. With this option, the homeowner uses the hecm reverse mortgage more like a credit card, using only bits of money at a time. In addition, because this option relies on purchases instead of fluid money, individuals who choose a reverse mortgage with a line of credit will not lose their Medicaid privileges.
No decision about obtaining a reverse home mortgage, however, should be made without consulting a reverse mortgage specialist or financial planner. You can also consult with an elder law attorney before you decide on a reverse mortgage, to make sure a reverse home mortgage is feasible if you and/or your spouse are on Medicaid or anticipate needing nursing home care in the near future.