Thinking of taking out a reverse mortgage? You may be uninformed about tax obligations. Z Reverse Mortgage can help.
Home Equity Conversion Mortgages (HECMs) have become popular among older homeowners who are searching for additional sources of income. That’s because this type of loan, which is only available to homeowners who are 62 years or older, allows property owners to turn part of the equity that they have in their homes into regular cash payments.
HECMs are known as a “reverse” mortgages. If you take out a Reverse Mortgage you receive a payment, based on the amount of equity that you own in your home and your home’s worth. Instead of sending a check each month to your mortgage lender, the lender pays you. You are exempt from paying back your reverse mortgage loan until you sell your home, move or die. Until that time, your only loan tax obligations involve paying the loan’s monthly interest rate and other household expenses.
If, for instance, you have $200,000 of equity in your home, based on today’s HECM limit of a 60 percent Reverse Mortgage ceiling on that amount, you would be able to access $120,000. You can take your payment as a line of credits or you can receive a set amount each month.