Reverse Mortgages and Medicaid

Many seniors are pitched the benefits of a "reverse mortgage" as a way to "unlock" the equity in their homes and pay for a better lifestyle. Does this make any sense? In what circumstances? What if one spouse needs to move into a nursing home? Let's take a look

With a conventional mortgage, you borrow a lump sum of money from a bank or mortgage company and each month you partially repay the loan by writing them a check. Thus, you must set aside cash flow every month to make sure you can make that payment. If you fall behind, you may find your house being foreclosed on by the bank.

With a "reverse mortgage," however, you receive a check each month from the bank or mortgage company, and you never have to pay them back as long as you live in the house. If the loan is made to a married couple, then no repayment need be made until neither spouse is living in the home.

At that time, the loan is repaid, plus interest. If the family members cannot pay the loan off, the house will be sold. Note, however, that if the amount of the loan exceeds the net proceeds from the sale of the house, the bank is simply out of luck---it cannot come after the family members for the shortfall.

Thus, a reverse mortgage may make sense for you if:

• you find yourself short of cash each month
• you would like to make lifetime gifts to your children or grandchildren and don't have the cash to do so
• you would like to have medical treatment not covered by Medicare or your health plan
• you'd love to go on an extended vacation
• your spouse must move into assisted living
• you like the idea of drawing down some of the equity in your house without having to repay the loan during your lifetime, so long as you are living in your house

Article Source: http://www.content.onlypunjab.com

© 2007 by K. Gabriel Heiser Attorney K. Gabriel Heiser has devoted his legal practice to Medicaid planning, elder law, and estate planning for the last 23 years. NOTE: For more information on this topic and other Medicaid planning techniques, see www.MedicaidSecrets.com, which describes an exciting new 256-page book written by attorney Heiser, "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets." You don't have to go broke to get Medicaid to pay your nursing home bills, you just have to know the rules and planning techniques. For the first time ever, you can learn the inside secrets of high-priced estate planning and elder law attorneys, in attorney Heiser's new book.

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