By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Medicaid Attorney

Today many seniors find themselves burdened with debt due to the high costs of medical care, prescription drugs, and energy. Typically one’s home is their major asset. Over the last couple years, real estate values have started to increase. Older homeowners who find themselves cash strapped to meet the daily costs of living have built up equity in their home and might want to consider a reverse mortgage.

What Is a Reverse Mortgage?

A reverse mortgage is no different from other types of mortgages except that repayment of the loan does not occur until the earlier of the following events:

  • The house is sold.
  • The homeowner passes away.
  • The homeowner is absent from the home for 12 consecutive months such as if all homeowners were residing in a nursing home.
  • Someone is added to the title of the home after the loan is made.

When any of these events occur, the home is sold and the debt paid off. The balance of the equity in the home passes to the heirs of the homeowners.

How Does a Reverse Mortgage Impact One’s Eligibility for Medicaid?

The money a homeowner receives from a reverse mortgage loan is not countable as an asset or income under the Medicaid program, if set up correctly. This means that a reverse mortgage will not impact one’s eligibility for Medicaid under current law. The loan proceeds should be placed into a bank account, typically a checking or savings account tied into your checking account and used monthly to satisfy outstanding bills. The loan proceeds should not be placed into a CD or an investment brokerage account. Please note however that there are some reverse mortgage products on the market where in connection with the mortgage you take the loan proceeds and buy a commercial annuity. This is known as a reverse annuity mortgage. This type of reverse mortgage, and only this type of reverse mortgage, will impact one’s Medicaid eligibility because the income from the annuity is counted as available income and will be used towards the cost of one’s long term care.

To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at Please ask us about our video conferencing consultations if you are unable to come to our office.