Monday, July 20, 2015

Is it worth it to pay off reverse mortgage with a forward mortgage?


My uncle took out a reverse mortgage on a house about 6 years ago when he was in bad financial and is under Medi-cal and Medicaid. Currently the reverse mortgage’s Loan Balance increase by about $1,200 per month and eating up the house equity. I also saw somewhere stating that Medi-Cal have an Estate recovery program where they will claim all his asset once my uncle pass away. My uncle would like to leave me with whatever is left of the house if anything were to happen to him.
I now have a stable job and I’m interest in keeping the house. I would like to know if it’s a good idea to take a forward mortgage under my name to pay off my uncle’s reverse mortgage loan (est $410,000) in order to transfer the house to my name. We were hoping this will avoid the Medi-Cal asset recovery from taking the house and prevent the reverse mortgage Loan Balance from increasing any further.

We live in California and is there a rule or law that will prevent my uncle from transferring the house to my name as a gift if we were to clear up the reverse mortgage? Will Medi-cal prevent this from happening or will this disqualify him from Medi-cal and Medicare? I do not want to take out a loan and dig a hole for myself or cause any hardship for my uncle if we will not be able to transfer the house to me and Medical will take all of my uncle asset if my uncle were to pass away leaving me in a bigger debt.
I would really appreciate it if anybody can help provide any suggestion and advice you may have.

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