Medicaid Ineligibility

• Social Security and Medicare payments remain unaffected by the acceptance of a reverse mortgage. Those homeowners on Medicaid, however, must beware that all amounts received have to be spent within the same month. This can be a useful option for those taking out a relatively small sum of $5,000, for example, to fix a roof. Any money kept beyond that one-month time frame is regarded as an asset and must be used in full before the resumption of Medicaid payments. Total cash assets cannot exceed $3,000 for a married couple or $2,000 for a single person.
  
  

Up-front Costs

• Up-front costs are a major deterrent and often make the option of a reverse mortgage prohibitive. They generally run between 5 and 6 percent, so if a homeowner is considering selling the house within several years, a number of options make better sense. These include home equity lines of credit, nonprofit grants or no-interest loans in the event of emergency repairs, or a tax deferral arrangement with local governments if the money is earmarked for back property taxes.
  
  

Estate Assets

• Homeowners who wish to leave their houses to children or other heirs should seek alternative options to a reverse mortgage. Because a home is usually sold to repay the reverse mortgage, this asset is no longer available to be passed down from one generation to the next.
  
  

Counseling

• Counseling represents the most essential element in any reverse mortgage situation. Because it is a required part of the program, homeowners are much less susceptible to quick sales techniques, scare tactics or the lure of fast cash. An independent counselor from an organization such as the National Foundation for Credit Counseling must walk potential borrowers through each step, clearly answer any questions that arise and go over the alternatives. All of this must happen before the reverse mortgage company can take the application.