Reverse Mortgage Blog

ABC offers ABC of Reverse Mortgage

ABC News gives an overview of reverse mortgage. Potential borrowers: beware that taking a reverse mortgage may affect your eligibility of Medicaid and other government assistance programs.

Before your parents make a decision, it is important to understand what a reverse mortgage is, as well as its advantages and disadvantages. A reverse mortgage is a loan that allows homeowners 62 years of age and older to borrow against the equity in their homes without having to sell the home, give up the title or take on a new monthly mortgage payment. This type of loan is tax-free and need be repaid only when the last borrower dies, sells the home or moves away permanently. At this time, the loan must be repaid in full, including all interest and other charges.

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Advantages and disadvantages of reverse mortgages: There are several advantages to a reverse mortgage. For starters, the money received from a reverse mortgage can be used for anything — daily living expenses, medical bills, prescription costs, home repairs, etc. Furthermore, this income does not affect regular Social Security payments or Medicare benefits. Additionally, lenders cannot foreclose on the loan for the life of the borrower, which makes reverse mortgages an important financial cushion for some seniors.

The downsides of such a loan are that it may affect eligibility for state and federal government assistance programs, such as Medicaid. In addition, because the borrower makes no monthly payments, the amount owed grows larger over time, meaning there will be less money left over once the home is sold. As a result, your ability to pass along your home as an asset to your heirs is affected.