Tax Impact of a Reverse Mortgage

Q. I am a 65-year-old widow and own my home, valued around $550,000. I would like to do some remodeling and am thinking of taking a reverse mortgage lump sum for about $50,000. What will that do to my income tax situation? I also own four rental properties and have a comfortable retirement income. Will the reverse mortgage put me in a higher income tax bracket?

A. A reverse mortgage will have no effect on your income taxes. You don't even need to report the income. There's a very good reason. Borrowed money is tax-free.

The only time reverse mortgage could affect your financial situation would be if you are receiving SSI (supplemental security income) or Medicaid (Medi-Cal in California). If SSI or Medicaid recipients don't fully spend their reverse mortgage income each month then their benefits can be reduced. But that doesn't sound like your situation.

I suggest you evaluate all three reverse mortgage plans: FHA, Fannie Mae and Financial Freedom Plan. Your eligibility amount is based on your age and your home's appraised market value. There is no personal liability. Repayment occurs only when you sell your home, permanently move out, or die.

You can elect to receive up to your maximum amount as a lump sum, credit line (except in Texas), lifetime guaranteed monthly income (even if you live to 110), or any combination.

Call 1-888-973-8377 to speak with a Reverse Mortgage Specialist