Reverse Mortgages: Frequently Asked Questions in San Antonio, Texas

Part Two of Two

How is interest calculated on a reverse mortgage?

Interest on a reverse mortgage is calculated based on the money paid out to you. In general, reverse mortgages have variable rates, though fixed rate reverse mortgages are becoming more popular. Variable rate reverse mortgages are based on certain indexes. Interest is not covered by the proceeds you get from a reverse mortgage – it builds up over the course of the entire loan until it’s repaid.

Does a reverse mortgage affect tax liability?

Reverse mortgages are not counted as standard income, but they may still be partially taxable. The IRS sometimes provide tax breaks for interest paid toward loans, but no interest is paid on reverse mortgages until the loan ends. Thus, this is not a concern until then. The insurance premium that is required to take out a reverse mortgage can be deducted from your taxes for that year.

How do reverse mortgages work with existing mortgages?

Reverse mortgages must be the primary liens on a property, which means that all other debts must be paid off when the loan is taken out. You can use the proceeds from the reverse mortgage to pay off your regular mortgage or other debts so that the reverse mortgage becomes the primary lien. This frees you from making monthly payments which can make it easier to make ends meet.

How do reverse mortgages interact with government assistance programs?

Some people worry that taking out a reverse mortgage will disqualify them from getting social security or other benefits from the government, but this is not the case. The only benefit that may be affected is Medicaid, which is based on how much money you have available. If you spend the money from a reverse mortgage immediately, it will have no effect. If you keep some money, however, it counts as an asset and may disqualify you from Medicaid.

Where can I learn more about reverse mortgages?

There are counseling sessions that are required in order to take out certain types of reverse mortgages. These counseling sessions are designed to ensure that you fully understand the responsibilities and repercussions of taking out this sort of loan. At the end of the session, you’ll be given a certificate that confirms you understand how reverse mortgages work.

Visit me at www.texasreverse.net if you need help with a reverse mortgage in the San Antonio TX area.