A Reverse Mortgage Can Help You In An Easy Stressless Way

By Louis Hanks on May 21, 2011, 10:23 am

Although “reverse mortgage” is the current buzzword in the industry, they are not new to the financial landscape. The first documented reverse mortgage loan was secured by Nellie Young. The young woman made the arrangement in 1961 thanks to the Maine-based Deering Savings & Loan. Reverse mortgage arrangements were far and few between until the Federal Housing Administration Insurance Program was signed into law in 1988. The American Association of Retired Persons (AARP), an organization tasked with helping aging Americans, was instrumental in launching the original reverse mortgage pilot program. Initially, 50 lenders participated in the program and the first government-insured reverse mortgage was given in 1989. The program experienced another growth spurt in 1998 when all lenders were encouraged to partake.

Receiving Money

Homeowners can receive money from the reverse mortgage in monthly payments, or, if they prefer, they can get a lump sum of cash. The monthly cash payments (or lump sum) that you receive from a reverse mortgage are not taxable income because you (or your heirs) have to pay the money back when the home is sold. It is just like any other kind of loan. Borrowed money is not “income” because it is a debt obligation that has to be repaid.

Interest Deduction

Now, let’s look at how a reverse mortgage affects your interest deduction. We all know that the interest paid on your home mortgage is tax deductible each year. It is the last great tax shelter available to the average American. But what happens when you don’t pay your mortgage interest each year, as is the case with a reverse mortgage? You don’t lose the interest deduction, you merely have to wait until the interest is actually paid before you can claim it.

 

RMCA

RMCA Senior Membership Program, will give HECM borrowers access to resources and research through communication channels, tools, research and industry feedback. The program is open to new and existing borrowers and encourages current borrowers to connect with new borrowers in building a community of those with reverse mortgages.