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Reverse Mortgages and Taxes

The reverse mortgage has fast become of the hottest loan investments today. Each year, more and more people are considering this type of funding for their needs because it is low cost and affordable. It also allows the homeowner to tap into the funds that they need to make payments, to fund long term care or even to help them to secure a second home. There are many ways in which this type of loan can be used. In fact, in most cases, there are no restrictions on how it can be used, as long as the home’s mortgage is paid off in full prior to the funds be used otherwise.

What about taxes? This is another benefit of the reverse mortgage. Unlike other mortgages and loans where there are fees and taxes that bring down the loan from the start, the funds that come from a reverse mortgage are not taxed income. This allows the homeowner to secure the funds that they need without having to worry about the government taking a large chunk of it.

For those that are on social security or those that have Medicare, the reverse mortgage is still a plus for many. Unlike any other source of income, the reverse mortgage will not affect their benefits. In other cases, the individual is only allowed to make a specific amount of money per year over their social security benefits. The funds from a reverse mortgage do not qualify though and therefore you benefits will not decrease if you tap into this type of funding.

If those that receive these funds will hold them past the end of the calendar month, though, the funds will be considered liquid assets. Therefore, this can harm them in their eligibility for these programs.

The amount of money that you will get from your reverse mortgage is determined in several ways. First, the home will need to have a Federal Housing Administration or Fannie Mae approved appraisal. This will determine the value of the home. It is also determined based on the starting interest rate of the loan, the fees that are involved as well as the location of the home. All of these things play into the amount of funds that can be acquired through the reverse mortgage.

When considering a reverse mortgage, homeowners will need to seek out HUD approved counseling to help them to make the right decisions for their needs. Because these mortgages are FHA backed, they can provide these services to the homeowner so that they can make the right decision.