How are the payments from reverse mortgages issued?
Homeowners can choose either to receive a lump sum payment for the amount they qualify for, or to receive monthly payments, referred to as tenure. While a lump sum payment gives you the advantage of having all of the funds at your disposal to use as you wish, with monthly payments the remaining balance can earn interest until it is dispersed. For homeowners that prefer the benefit of both a lump sum payment and monthly payments, there is also modified tenure that combines the two options.
Do I have to pay taxes on money received from reverse mortgages?
No. Unlike home equity loans, the money received from RMs isn’t considered a payment; it’s your own money, not additional taxable income.
With the funds received from a reverse mortgage affect my government benefits?
This depends on how you choose to have the money issued and how you use the money. Since the money is not considered income receiving monthly payments from RMs does not affect government benefits such as SSI or Medicare. However, if you choose to take a lump sum payment, any amount remaining one month after receiving the money can be considered a resource and can affect your benefits.
I own more than one home. Can I get reverse mortgages on all of the homes that I own?
No, a RM can be taken only for your primary residence. The types of primary residences that apply are single family homes and qualified town homes, condominiums, and manufactured homes.
Do I have to own my home outright in order to qualify for a reverse mortgage?
RMs are available even for those that owe money on their homes. However, you’ll need to use the money from the RM to pay off the outstanding debt. So while you may not receive a lump sum payment or extra money each month from the reverse mortgage, you can eliminate your monthly mortgage payment to increase monthly cash flow.
Before taking out a reverse mortgage, be sure to speak with a loan counselor who can help you to better understand how the details of a mortgage of this type apply to your particular situation. RMs are a great option for seniors who have worked hard to build equity in their homes and need extra income after leaving the job or who just want to enjoy their retirement years.