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Tax free reverse mortgage loan has several benefits. The most important one is, it has no monthly back payments. A senior can even pay away the usual mortgage with the reverse mortgage and get even more cash money every month.
The reverse mortgage payments can influence on your eligibility for the Government benefits, like Medicaid. A general rule is, that the income from the reverse program is not counted as income, if the money will be spent during the same month as it has been received.
The basic nature of the reverse loan is, that it will be taken against the equity of the home, there are no monthly back payments and the whole loan capital, interests and other costs will be paid back, when the loan will be closed.
The interest rate can be either a fixed one or a variable one. The variable one is tied to some index and follows the development of that index, saying it will vary during the running time of the loan.
Because the borrower will not pay anything on a monthly basis, including the interests, he cannot deduct any paid interests during the running time of the loan. When the loan will be closed, the interests are paid.
At this time the home will be sold and the loan capital, interests and other costs will be paid away. After this the borrower can deduct the paid interests in the taxation. As said earlier it is important to note, that because the reverse mortgage payments are not income, but come from the home equity, they are parts of the loan, the interest they include can be deducted.
To get more detailed information, it is wise to go and meet the federal reverse mortgage counselor, who can calculate the precise sums.
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