Reverse Mortgages and Medicaid Reviewed
Reverse mortgage is definitely an attractive scheme for senior individuals. Unlike normal mortgage, in which you borrow a sum of money from a firm and keep your house as collateral, reverse mortgages involve the firm paying you money on a regular basis, till the time you stay in the particular house. Once you vacate the house, you can either pay off the loan or the firm gets the rights to sell the house and accept the money it gets, as a repayment for the loan.
Elderly individuals usually take a reverse mortgage loan so that they can enjoy a better lifestyle. However, many individuals fail to understand the pros and cons of reverse mortgage and end up making a hasty decision. Taking a reverse mortgage can adversely affect your Medicaid. According to the Medicaid program, individuals with low incomes, or certain chronic diseases can get certain health benefits.
The eligibility requirements for Medicaid vary from state to state. However, if the equity of your permanent residence is not tapped in any manner, it cannot be considered as an asset for Medicaid. Reverse mortgages are one of the ways of tapping your home equity. If you do the same, it may nullify your Medicaid.
While obtaining a reverse mortgage, you should keep in mind that it needs to be paid back immediately after you move out of your house. Therefore, if you stay alone and have a health problem that may cause you to stay in a hospital or nursing home, you should not apply for a reverse mortgage, even if you are eligible. However, if you live with your spouse, you can take a reverse mortgage for a couple. This ensures that you remain eligible for the monthly payment, even if one of you is hospitalized. Consequently, even if the reverse mortgage nullifies your Medicaid, you can use the payment to cover the medical expenses.
Another way of ensuring that reverse mortgage does not affect your Medicaid is by choosing the line of credit option. Here, you are offered some credit on a regular basis that you may or may not use. Thus, even if you spend the credit, it will be considered as a loan and not as an asset. The problem of Medicaid eligibility arises only when you invest the money you get from reverse mortgage into some scheme, making it an asset.
If you are already on Medicaid and want to opt for a reverse mortgage, you can do so. However, you will have to spend the money that you get from Medicaid immediately. This means that you cannot save some of the money you get in the current month for the next month.
It is possible to have both a reverse mortgage and Medicaid; however, you should consult an expert to ensure that one scheme does not affect the other.
