Thankfully, there seems to be very little confusion now that a reverse mortgage – while insured indirectly by the government – is itself NOT a government benefit. Many borrowers, however, don’t understand how obtaining a reverse mortgage will affect their actual government benefits.

Since reverse mortgage borrowers are necessarily of retirement age, this is potentially a serious issue. After all, the goal of a reverse mortgage is to supplement one’s entitlement income and retirement savings. Thus, it would be counter-productive, if not disastrous, if the funds obtained from a reverse mortgage suddenly rendered one ineligible for other benefits.

Fortunately, there seems to be very little impact of obtaining a reverse mortgage on one’s primary entitlement benefits. With social security, the amount that you receive is generally proportional  to the amount that you paid into the fund while you were working, so any additional income you receive after you’ve retired won’t affect your entitlement. The same is generally true for Medicare; once you qualify, it doesn’t really matter what your financial position is, from the standpoint of the government.

On the other hand, obtaining a reverse mortgage can definitely impact your eligibility for need-based programs, such as Medicaid, Food Stamps, etc. When computing these benefits, the government will take all of your income into account, including funds received from a reverse mortgage. However, if these funds are relatively modest, and if you typically spend your disbursement in the same month that you receive it, you may able to claim them as cost-of-living funds (as opposed to disposable income). In this case, your should still be eligible to receive your government funds.

For all of these benefits, you should consider that the government will probably have to make some tough decisions in the next couple decades in order to make sure that they remain functioning. That probably means that they will become more aggressive in determining who actually needs these funds, irrespective of who is entitled to them. Fortunately, this kind of scrutiny is still many years away, and for now, you can rest assured that obtaining a reverse mortgage probably won’t affect your access to government benefits.

Of course, it’s probably wise to speak with the various administrators of your benefit programs (as well as an attorney) before obtaining a reverse mortgage, just to be on the safe side.