Does Getting a Reverse Mortgage Affect Your Social Security Benefits?
Whether or not to obtain a reverse mortgage loan can be a big decision for baby boomers or aging seniors, and making the right choice typically comes after a lot of questions and concerns. One of the most frequently asked questions before applying for a reverse mortgage is whether or not the loan will affect Social Security Benefits.
Considering a reverse mortgage is a popular option for many retirees to preserve their nest egg and generate extra money for living expenses, the last thing they want to do is lose or diminish their entitlement benefits. So, to answer the question, reverse mortgage payments will not affect Social Security or Medicare benefits because a reverse mortgage is based upon home equity and NOT income. Social Security is not considered taxable income. However, with other public benefits such as Medicaid and Supplemental Security Income (SSI), payments could possibly be affected by a reverse mortgage loan. Your lender can help you determine if your benefits may be impacted.
The reason that your Social Security benefits aren’t typically affected by a reverse mortgage loan is because it is a government program—based on what you and/or your spouse paid into while working—and it’s available to anyone regardless of their income. In fact, getting a reverse mortgage could actually increase your social security benefits by allowing you to delay receiving those benefits.
According to the Social Security Administration, if you start receiving benefits at age 66 you get 100% of your monthly benefit. If you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase. If you start receiving benefits at 67, you’ll get 108% of the monthly benefit because you delayed getting benefits for 12 months. If you start receiving benefits at 70, you’ll get 132% of the monthly benefit because you delayed getting benefits for 48 months. When you reach age 70, your monthly benefit stops increasing even if you continue to delay taking benefits.
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For example, at age 62 an average person would only get about $1,350 per month. But if he or she waits to draw benefits until the age of 70, he or she would get $2,376 – a significant difference. So, if you have equity in your home, and use it sensibly to make ends meet, you can decide to postpone social security benefits to get more of your money in the long run by getting a reverse mortgage.
Remember, a reverse mortgage lets you use the value of your home to provide a source of income while allowing you to stay in your home. Reverse mortgages do not require an income or credit score, but you must prove your ability to maintain the home, pay the taxes and insurances, and you are required to participate in a third-party reverse mortgage counseling session.
No matter your financial situation, there are almost always options available to use your home equity as a financial planning tool. Please keep in mind that mortgage guidelines can and do periodically change, so check with a reverse mortgage professional for current guidelines.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.