Are People on Disability Eligible for a Reverse Mortgage?

A reverse mortgage offers a homeowner extra money, which will count toward income.

A homeowner that qualifies for Social Security disability benefits may be eligible for a reverse mortgage. However, once the threshold for earnings, as set by the Social Security Administration (SSA), has been passed, the SSA will try and transition that person back into the workforce. Due to the age requirements for a reverse mortgage, it may also be possible to receive Social Security benefits, rather than disability.

Disability Definition

In 2010, a three month period in which the worker earned $1,120 or more qualifies as one quarter earned.

Under the Social Security system, a disability is defined as a physical or mental impairment that prevents a worker from performing any activity that can produce income. Certain restrictive specifications provided by the Social Security Administration must be met in order for a person to qualify. Workers earn four work quarters a year. To be fully insured, a worker must have at least 20 quarters of work out of the last 40. If a person becomes blind before the age of 31, then half of the quarters prior to this must have been worked, totaling no less than six.

Reverse Mortgage Definition

A reverse mortgage is a type of loan that is based on the equity that a person has established in his home. It is the opposite of a standard mortgage, whereby the bank instead makes monthly installments or a lump sum payment to the homeowner. The money may be used by the homeowner for any reason. However, any mortgage existing on the home must be paid off with the proceeds.

Eligibility for a Reverse Mortgage

Homeowners 62 years of age and older can qualify for a reverse mortgage if they have sufficient equity in their homes. They must have the title to their home, and it must be their principal residence. The home must be maintained, and the insurance and property taxes be current. Should they choose to move, the homeowners must repay the reverse mortgage through the sale of their home.

Reverse Mortgage Eligibility with a Disability

A person that qualifies for disability is subject to certain restrictions imposed by the Social Security Administration. These include limits on income, which for 2010 was $1,000. If a person earns more than this, by any means, he may be considered as transitioning back into the workforce. However, at the age of 62, a person also becomes eligible for Social Security. At this point, the homeowner can supplement his Social Security income with a reverse mortgage.

References

• Social Security Administration: What You Need To Know When You Get Social Security Disability Benefits
• National Reverse Mortgage Lenders Association: Basic Features of a Reverse Mortgage