What are the Reverse Mortgage payout options, and are they taxable?

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Real Estate Mortgage Broker with Guild Mortgage Company # 3274 Branch #176.............We are a Equal Housing Lender Co.3274 NMLS 264534

What are the Reverse Mortgage payout options, and are they taxable?

A question I'm often asked about a Reverse Mortgage is: how do I get the money? And, will I be taxed on the money from a Reverse Mortgage?

There are 6 different payout options for a Reverse Mortgage, and they are all based off the equity in your home at the time of closing.

  • Lump Sum: This is the most common form of payout I see.  It is the full amount of the Reverse Mortgage, in a complete lump sum.  No monthly check, and no Line of Credit.
  • Line of Credit: This is the full amount of money from the Reverse Mortgage that can be used whenever you need money.  It will sit in a Line of Credit account, and you will not be charged interest until you draw from the Line of Credit.
  • Tenure: This is a check for an equal amount that is mailed to you each month.
  • Modified Tenure: This is a combination of the Tenure and Line of Credit; you will receive a check for an equal amount each month, and also, you will have a Line of Credit to use whenever you need money.
  • Term: This is a check for an equal amount that is mailed to you each month for a fixed amount of time that you have chosen.
  • Modified Term: This is a combination of the Term and Line of Credit; you will receive a check for an equal amount each month for a fixed amount of time that you have chosen, and also, you will have a Line of Credit to use whenever you need money.

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As far as taxes are concerned, at this time, the IRS is not treating the money received from a Reverse Mortgage as taxable income.  Also, money received from a Reverse Mortgage does not affect Social Security benefits, Medicare benefits, or pension payments.

Please note however that if you are on Medicaid, the Lump Sum or Line of Credit payout options may be your best options, as any money received from a Reverse Mortgage would need to be used immediately upon receipt.  The reason is because Medicaid is based on financial eligibility, and keeping any money received from a Reverse Mortgage could affect your eligibility for Medicaid.  I advise all my clients to talk to their attorney or CPA if they are on Medicaid and are interested in a Reverse Mortgage.

If you have any other questions about Reverse Mortgages, give me a call at 541-868-1050 or email me at loansbyellenadams@gmail.com.  I look forward to hearing from you and giving you an estimate on how much you may be eligible to receive with a Reverse Mortgage!

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_______________________

Ellen Adams with Academy Mortgage 

18 YEAR VETERAN IN THE MORTGAGE INDUSTRY

    Phone: 541-521-7192

    Cell: 541-521-7192

    Email :Ellen.adams@academymortgage.com

   Website: www.academymortgage.com/ellenadams

    NMLS: 264534 

    Stay In Touch: follow me on twitter Go to my WP website Go to my Facebook Page

 

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Topic:
ActiveRain Community
Location:
Oregon Lane County Eugene
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Tags:
reverse mortgage
senior
retirement income
retirement
home equity
line of credit
payout options

Comments 4 New Comment

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Ambassador
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Ralph Gorgoglione
California Real Estate (800) 591-6121
John Aaroe Group

This is an excellent and informative post! Thank you for sharing this post.

February 17, 2011 05:34 PM
Rainmaker
861,468
Rick Obst
Rick Obst

Ellen, This is another of your well written posts in this series explaining various facets of the reverse mortgage concept.  Good post.

February 17, 2011 06:11 PM
Rainmaker
139,210
Suzanne Taylor
Home Sales In Corpus Christi, TX
361-510-5413 http://www.CorpusChristiHomeFinderOnline.com

Ellen, once again I sit at your feet and learn.  Thanks for sharing, your posts are always so informative and most definitely worth the time reading them.  I often bookmark them (as I did with this one) so I can find them again easily.

February 17, 2011 11:21 PM
Rainer
90,783
Ellen Wright Adams
LoansByEllen- Licensed in Oregon
Guild Mortgage Company # 3274 Branch #176.............We are a Equal Housing Lender

Ralph: thanks for joining us. Glad you found this topic.

Rick:  again we connect. Thanks for your comments , you are my city wide hero !!!

Suzanne:  thanks for bookmarking them.  recently FHA has changed the monthly MI charges uh oh, effective april 18th,  i will be watching to see if this applys to Reverse Mortgages as well.

 

February 18, 2011 12:52 PM
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Rainer
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Ellen Wright Adams

LoansByEllen- Licensed in Oregon
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