Are Reverse Mortgage Payments Tax-Free?
The proceeds from a reverse mortgage are not taxable. This can be very beneficial for seniors who are on a fixed income. But, please remember, your payments are not income. You are still borrowing money that will be paid back when your estate is settled, and you are still responsible for paying your property taxes.
Reverse mortgages are loans that allow homeowners to access the equity in their homes. In a reverse mortgage, you don't make monthly payments, and you never pay interest on the loan. Instead, you choose to receive one-time or recurring payments.
If you're concerned about paying taxes on the money that you receive from a reverse mortgage, it's important to know how they work.
Remember, your payments are not income.
You are still borrowing money that will be paid back when your estate is settled. When your heirs sell the home after your death or upon moving out of it, they'll need to pay off any outstanding balance of the loan. This means that even though you don't have to make payments on a reverse mortgage, the money still needs to be repaid. Unless the home is worth less than the loan amount. Your heirs are not responsible for debt beyond the sale price of the home.
If you choose a reverse mortgage, you are still responsible for your property taxes, homeowners insurance, and any HOA fees.
If you are considering a reverse mortgage, contact us today at (727) 784-5555 to learn more!
Or use the form below to ask a reverse mortgage question.
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