Public Benefits: An Alternative to Reverse Mortgages

Your home is probably the most important investment you have ever made. You've probably spent much of your adult life making monthly payments to buy it and make it yours. So cashing in on that long-term investment while continuing to live in your home can be an appealing idea.

But most people have also made another kind of long-term investment. They've paid taxes all of their adult lives that have supported a variety of public programs. From time to time, most of us have benefited from some of these programs. But you can't benefit from a program if you don't know it exists. That's why you should be aware of—and apply for—any of the major programs for which you may be eligible.

Extra Income: SSI

Many Americans aged 65 and over who are eligible for monthly cash benefits from Supplemental Security Income (SSI) are not getting them.

To qualify for this program in 2008, your liquid resources (cash and savings) must be less than $2,000 ($3,000 for a couple). Certain resources, such as a home, a small burial fund, or one car usually do not count. Your monthly unearned income cannot exceed $657 ($976 for a couple). But the income limits are higher if you have earned income from a job or if you live in one of the states that supplements SSI.

If you qualify for SSI, you may also automatically get other public benefits, too. For the latest information, call 1-800-772-1213 or see "Additional Resources."

Health Care Costs

Public benefit programs can also help pay for medical expenses and prescription drugs. For the latest information, see "Additional Resources."

Agencies on Aging

Your best source for a wide variety of public benefit programs is your area agency on aging (AAA). Find your AAA by calling 1-800-677-1116 or use the link to Area Agencies on Aging. This agency can help you find programs such as energy assistance, property tax relief, household chore services, home health care, prescription drugs, meal programs, housing, transportation, and many others.

Benefits QuickLINK

This one-stop public benefits source helps you find the 15 most valuable low and no-cost programs that pay for basic expenses, help you stay healthy, support children in your care, and assist older relatives. You fill out a questionnaire to find programs for which you may be eligible. You get the contact information, applications, and websites you need to learn more about—and apply for—these programs. To use this resource and get state-specific fact sheets, go to www.aarp.org/quicklink/.

Postpone or Combine

Public benefits may allow you to postpone getting a reverse mortgage. Then you may get larger future loan advances because you will be older and your home's value is likely to be greater at that time. And the longer you wait, the less your equity will have been consumed by interest charges.

On the other hand, you can sign up for public benefits and take out a reverse mortgage. If you do, your need for loan advances will be less than if you were not receiving public benefits. By taking smaller loan advances, you will have smaller interest charges and preserve more equity for future use.

Cautions

It's important that you don't jeopardize your public benefits by getting more cash than you need from a reverse mortgage.

For example, loan proceeds that stay in a checking or savings account at the end of a calendar month are counted as assets by SSI and similar programs. If your total assets exceed SSI limits (currently $2,000 for a single person, $3,000 for a couple), you can lose your eligibility. So limit your loan proceeds to what you expect to spend in a given month (Source: Reverse Mortgages: A Lawyer's Guide, American Bar Association, 1997, pp. 35-36).

AARP does not endorse any reverse mortgage lender or product.