The Tax Advantages of Reverse Mortgage Loans
One of the most innovative financial instruments today is reverse mortgage
. You stand to gain lots of benefits from this loan. That is why its popularity is increasing year after year.
Reverse mortgage is an ideal mortgage vehicle for seniors who need to solve major financial problems. With this type of loan, seniors can easily access the equity savings they built over the years. Most important of all, you will not lose ownership of your home if you get a reverse mortgage.
Some Basic Facts about Reverse Mortgage
Reverse mortgage is available for seniors who are at least 62 years old. By getting this loan, you have the option to choose different payment modes. You can receive a lump sum amount, monthly regular checks, or a line of credit. Repayment with interest will only be required if you sell your home, you move to another place permanently, or if you pass away.
The cash advances you get from a reverse mortgage are not taxable. Your Medicare and Social Security benefits will not be affected by this loan. You have to note that reverse mortgage does not require you to surrender your title. You will still own the property as long as it is your primary residence.
The loan will become due when you sell the home or when you transfer residence. If the borrower dies, then it must be repaid together with all accrued interests. But because this is a reverse mortgage, the interest will be added to the lien on the property.
Tax Deductibility and Reverse Mortgage
The issue of tax deductibility is a bit confusing for those who want to take out a reverse mortgage. Remember that this loan is radically different from the usual conventional mortgage. So the interest associated with reverse mortgage is not tax deductible. It becomes deductible only when the loan is up for repayment.
The upfront expenses and the interests of reverse mortgage are normally added to the loan. Basically, you are not paying for these items out of pocket. So according to the IRS, the expenses are not actually being paid. This is the reason why they can not become tax deductible. They can become deductible once the reverse mortgage matures. Maturity of this loan could mean that the last borrower has died or the property has been sold. Reverse payment is also due if you move permanently to another home.
Reverse mortgage is known by other names. It is also called as the home equity conversion mortgage or the reverse annuity mortgage. The best thing about reverse mortgage is that you are not required to produce documents about income history or credit rating. As long as you own the equity to your home and you are at least 62 years old, then you may qualify for the reverse mortgage loan.
A reverse mortgage can provide financial freedom from senior citizens. This loan is now being enjoyed by hundreds of thousands of retirees. You can live a more comfortable life because of the sure income provided by reverse mortgage.
The Tax Advantages of Reverse Mortgage Loans
By: Rob Blake
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