Long Term Care (LTC): Reverse Mortgages

What Is a Reverse Mortgage?

A reverse mortgage is a loan.  A homeowner who is 62 or older and has considerable home equity can borrow against the value of their home and receive funds as a lump sum, fixed monthly payment or line of credit. It does not require the homeowner to make any payments.  Instead, the entire loan balance becomes due and payable when the borrower dies; moves away permanently; or sells the home.

How do we look at a Reverse Mortgage?

We treat it as a loan.  It is not countable.  If it is received in a lump sum any balance would be counted as a resource after 90 days unless it is encumbered.  An example of encumbered would be if the loan was for home repairs and the home repairs have not yet been completed.  The funds from the reverse mortgage set aside to pay this expense would still be exempt.  If the proceeds are used to purchase an income producing resource, such as an annuity or certificate of deposit, the income and interest are counted as income.

What the worker needs to do:

  • Obtain a copy of the reverse mortgage
  • Verify who and how the money was received
  • Ensure how the money was spent (check for transfer of asset)
  • Remember to complete lien paperwork if required

For additional information refer to ITS 317:35-5-41.9

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