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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.
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