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Are Reverse Mortgages Tax-Deductible?

One of the newest and more innovative financial tools for the Senior Citizen, today, is the reverse home mortgage. Already very popular, as the info on the reverse home mortgage becomes widespread, and homeowners reach retirement age in large numbers, this may become the most popular home mortgage vehicle of all. The reverse home mortgage solves a major financial problem for Seniors, how access the equity-savings they have built up on their homes without having to sell. Let me explain what is reverse mortgage?

Reverse mortgage loan advances are not taxable, and generally don’t affect your Social Security or Medicare benefits. You retain the title to your home, and you don’t have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence. Unlike a regular mortgage, the homeowner makes no payments and all interest is added to the lien on the property.

When it comes to the issue of tax deductibility, things get a little hairy. Unlike a conventional mortgage, the accrued interest associated with a reverse mortgage is not tax-deductible in the usual fashion; it is deductible at the time the reverse is paid off.

A reverse mortgage is a type of loan in which is allowed up to a certain percentage of the full equity in a home; also called reverse annuity mortgage or home equity conversion mortgage (HECM). Reverse mortgages are often used by for retired or elderly persons. Actually all lenders reverse programs that I have seen had a requirement like that you had to be at least 62 years old. The title of your home remains in your name and the home can be left to your heirs, this is always true. Obviously the lender will build up their equity in your home as you use yours. The reverse mortgage comes to an end when the borrowers have all passed away or the home is sold, or you move out permanently. Depending on the type of that you chose, a certain percentage of the home’s value can be reverse mortgaged. Fortunately the target audience is often no longer full time employed anyway; lenders will not have any income or credit score requirements to qualify for a reverse mortgage.

Both the upfront expense of a reverse mortgage (loan origination fee) and the interest accrued over the life of the reverse mortgage are added to your reverse mortgage balance. So you don’t actually pay these items. The IRS states that these expenses since they are not actually paid cannot be deducted until the reverse mortgage matures. This is the case when you sell your home or used up all equity.

Reverse mortgages have helped hundreds of thousands of homeowners improve their quality of life in retirement. A Reverse Mortgage can help you retire more comfortably. It can provide you with money when you need it most. No Monthly Mortgage Payments, Easy Qualification, Tax-Free Money and No cash needed for closing costs. Can it get any better? If you’d like to find out how much money you qualify for and if you’re eligible, contact us at 714) 349-8890


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