There was a story about how reverse mortgages can lead to financial ruin that I found somewhat interesting – especially with the amount of seniors who are looking into getting an Arizona reverse mortgage.

Will a reverse mortgage lead to financial ruin?

According to Consumer Reports… maybe!

From the story:

Ads for reverse mortgages sound pretty enticing. Use the equity in your home to pay off debts or make a big purchase. You’ll still be able to stay in your house and even have some money to leave to your heirs.

At 83 years old, Arlene Schwemmer is no longer able to live on her own and has had to move. She’s worried that she’ll get nothing from the sale of the home she shared with her late husband for 49 years.

Arlene’s daughter says that’s because a broker persuaded her parents to take out a reverse mortgage four years ago. The terms were complicated and hard to decipher.

“The decision on the reverse mortgage was one of the worst decisions I think my folks had ever made. It was tragic,” Diane Zaugg said.

The Key To Not Letting A Reverse Mortgage Ruin You

If you are a senior who is thinking about a reverse mortgage, there can be far better financial alternatives for you than getting a reverse mortgage. It all depends on your financial situation. The only way that a reverse mortgage can really “ruin” you is if you had a better option and didn’t take advantage of it.

But for many, many seniors who are currently thinking of taking advantage of the FHA reverse mortgage program – they really have no other alternative to accessing money they need to live on.

And if it is your last resort, can you really say that it was a bad decision?

I don’t see how.

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If you are considering an Arizona reverse mortgage, be sure that you ask your loan officer about something called “Loss of Medicaid Eligibility”.

If he doesn’t know what you are talking about, you might want to consider finding another loan officer. It is that important.

Loss of Medicaid Eligibility: What Is It?

With a reverse mortgage there are multiple ways to get your money. You can choose to get a lump sum, monthly disbursements or a line of credit. Some of the types of payouts increase the risk of you losing your Medicaid Eligibility, and some do not.

The essence of a LOME risk is that a reverse mortgage borrower could pile up cash in an account and deny themselves the significant health benefits that medicaid could provide. Medicaid is a federal-state healthcare program for the poor. To qualify for Medicaid, a senior must show monetary evidence of poverty. Although the program varies from state to state, a federal “means test” says that you can have no more than a few thousand (the number changes regularly) dollars in liquid assets.

Which means if you took out a reverse mortgage, chose the wrong payout program and later become ill and needed long term care, you may be denied Medicaid coverage based on your liquid assets.

Loss of Medicaid Eligibility: A Rule of Thumb

The general rule of thumb regarding LOME risks is this: all reverse mortgage payout options except for the line of credit option carry significant LOME risks because they could lead to risky accunulation of countable assets.

Does this mean that you should always choose the line of credit payout option when getting a reverse mortgage? I was taught long ago to try to avoid using always and never, but I can say this…

Be sure to do your homework about your options – and what possible implications your payout choices may have.

Learn more about Loss of Medicaid Eligibility (LOME) and LOME risks here.

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HUD Mortgagee Letter Raises Arizona Reverse Mortgage Loan Limits

Yesterday, HUD published an official Mortgagee Letter (2009-07) that raised Arizona reverse mortgage loan limits to $625,500.

This is good news for Arizona seniors!

As of yesterday, anyone who is interested in getting an Arizona reverse mortgage can now have access to more money. The old loan limit was $417,000 and the higher $625,500 Arizona reverse mortgage limit is in place for the rest of 2009.

Arizona Reverse Mortgage Options

Many seniors are choosing to get an Arizona reverse mortgage because they want to enjoy their golden years of retirement and not worry about making their next mortgage payment. Getting access to the equity in your home is now easier than ever with the FHA reverse mortgage program. Just a few of the benefits of the Arizona reverse mortgage program include:

• No monthly mortgage payments
• Title remains in your name
• Tax-Free money can be used in any way you choose
• Option for a credit line to handle life emergencies or unexpected expenses
• No income, credit or health requirements
• Eliminate debt by paying off mortgages and credit cards

In order to qualify for an Arizona reverse mortgage you must:

• Be age 62 years of age or older
• Own your property
• Occupy your property as primary residence
• Single family home or 1-4 unit home with one unit occupied by the borrower
• Participate in a consumer information session given by an approved HECM counselor

If you were one of the many seniors who were waiting for the Arizona reverse mortgage loan limits to increase – it is now time to act.

Related Posts

• Reverse Mortgages Lead To Financial Ruin?
• FHA HECM for Purchase Program: From The Inbox
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