A reverse mortgage does not affect “non-means-tested” government benefits programs such as Social Security. However, a reverse mortgage can affect “means-tested” programs including Medicaid because those programs test to see how much financial resources a homeowner has available.
Social Security is an entitlement program that one is eligible for regardless of income. Consequently, Social Security is not affected by a reverse mortgage.
SSI (Supplemental Security Income)
SSI is a federal income supplement program that aids the elderly, disabled, and those with little or no income. Consequently, eligibility for SSI can be affected by a reverse mortgage.
The requirements for SSI are very similar to the Medicaid requirements. SSI eligibility requires applicants to have no more than $2,000 ($3,000 for a couple) in countable assets one day out of the month. To explain further, for an individual to be eligible for SSI he/she cannot have more than $623 in countable monthly income or more than $2,000 in countable resources (car, house, etc). The reverse mortgage is not considered income so that eligibility requirement is not affected.
However, if an individual on SSI were to receive a lump sum of $6,500 from his/her reverse mortgage loan and spend only $4,000 of it in the month in which it was received, putting the remaining amount ($2,500) in the bank, then he/she would no longer be eligible to receive SSI because after 30 days the $2,500 would become an asset and exceed the eligibility requirements.
In short, a reverse mortgage does not automatically disqualify a homeowner for SSI but the homeowner has to be careful with the timing of spending of the reverse mortgage funds. You should contact your SSI administrator to determine exactly how to comply with the SSI eligibility requirements if you take out a reverse mortgage.