How Can Homeowners Getting Supplemental Security Income (SSI) or Social Security Disability (SSDI) Increase Their Income?
Learn how disabled homeowners can increase cash flow without debt and still keep their SSDI and SSI disability benefits.
Whether receiving Social Security Disability (SSDI) or Supplemental Security Income (SSI), living on a fixed income can be difficult and the choices for a disabled person to increase income are limited. One of the few, and for some disabled homeowners best, options is a reverse mortgage.
What is a reverse mortgage?
If you own or are buying the home you live in and have a large percentage of equity in your home, some lending institutions—banks, credit unions, and mortgage companies—will purchase your home from you little by little while you continue to live in it. The way it works is that a bank, for example, will send you regular monthly payments while you retain full rights to live in your home or will give you a large lump sum. The amount of the payments depends on the value of the property, how long the reverse mortgage is set up for, and other factors you work out with the bank.
A reverse mortgage puts a lien on your property that has to be paid, but not while you are living in your home. When you die or move out of your home, the property must be sold and the reverse mortgage payments plus interest paid back to the bank from the proceeds of the sale. (This is not a bank sale of your home; rather you or your heirs sell the home and the bank lien is satisfied when the sale of the house is finalized, just like a regular mortgage.)
If you take monthly reverse mortgage payments, gradually, your equity in the property (portion of your property that you own) goes down, but you still get to live in your home while you have additional income to meet your current needs and some of your desires.
Reverse Mortgages and SSI
A reverse mortgage can be a great option for any disabled or retired person who is challenged in being able to take care of their current needs, but it is an especially good resource for individuals who receive Supplemental Security Income (SSI) because the reverse mortgage payments are not income and do not reduce SSI benefits.
Here’s the reason: With a reverse mortgage you are borrowing money and incurring a debt that must be repaid when you no longer live in the home. Because the money must be repaid, the money received is a bona fide (true) loan and is not considered income for SSI benefit calculation. Additionally, a debt is not a resource and the home you live in does not lose its excluded status when your resources are counted up. (Do note, though, if you save the reverse mortgage payments and have the money on hand in the month after it is received, it does count toward the SSI resource limits in those subsequent months.)
Of course, a reverse mortgage is not for everyone, but if you think it might be for you, Disability Advisor suggests that you shop around with various financial institutions to see what might work best for you and, of course, that you fully understand all papers you sign before entering into any agreement. If needed, consult with a real estate attorney and/or a financial advisor to be sure that a reverse mortgage is the right choice for you.