As a way to turn home equity into cash, reverse mortgages are becoming more and more popular. Before you get a reverse mortgage, you should know how it can affect your government benefits.
Reverse Mortgages and Government Benefits
The best thing about owning a home is the value of time. When you own a home for a long time, it becomes a more valuable asset. On the one hand, you pay off your mortgage over time, which adds to the value of your home. On the other hand, most property tends to go up in value over time. This is one of the things that makes owning a home so appealing.
As you get older and decide to retire, it can be hard to turn your home equity into cash you can use. People say that reverse mortgages are a solution. A reverse mortgage is a loan against your home's equity that you don't have to pay back until a certain event happens, usually when you sell the home. Basically, you have turned the way a traditional mortgage works on its head. In exchange for a piece of your home equity, the lender is now giving you money. Depending on the package you choose, you can get payments all at once, every month, or through credit lines. As time goes on, the value of your home goes down, but you have a reliable source of monthly income.
In the past few years, the government has tried to find ways to cut back on the benefits it gives to its citizens. One thing they like to look at is the value of the things you own. If you have a certain amount of assets, the government thinks you don't need your benefits and cuts them or takes them away. This article doesn't have enough space to talk about government benefits, but reverse mortgages do have an effect.
Most of the time, a reverse mortgage won't affect your Medicare or Social Security benefits. This is true, but only if you spend all of the money you get each month. For a single homeowner, the magic number is $2,000, and for a couple, it's $3,000. The government is always changing the rules about benefits, so make sure you know what's going on. You should know what you're getting into, especially if you depend on Medicare a lot to pay for your medical bills.
Most government benefits do not change because you have a reverse mortgage. Before you agree to a reverse mortgage, make sure you talk to someone who knows what will happen and why.
