How Will a Reverse Mortgage Affect My Other Finances?
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Many seniors who are looking into a reverse mortgage are concerned about how the money they will receive from this loan will affect the rest of their finances. The good news is that any money you receive from your reverse mortgage will have no impact on your other finances. Except, or course, for providing you with some extra income.

Social Security and Medicare Benefits

Reverse mortgages are considered loan advances. This means that they are not treated as income. Therefore they will have no affect on either Social Security or Medicare benefits that you may receive.

Taxes

Since the money from your reverse mortgage is not considered to be income, the IRS does not tax this money. That means that your taxes will not be affected by your reverse mortgage. It is important, however, to realize that the interest on reverse mortgages is not tax-deductible as would the interest on a traditional home mortgage. Once the loan is paid off entirely, if you choose to do this during your lifetime, the interest may then become tax deductible. It is best to talk to a tax expert about this possibility if that is your intention.

Supplemental Security Income, Medicaid, and Other Public Assistance

Your advances from your reverse mortgage will be counted only as liquid assets if they are kept in an account past the end of the calendar month during which you receive them. This means that as long as you use or invest your funds within that month, they will not affect your SSI, Medicaid, or other Public Assistance Income. You may want to consult a professional tax advisor for more information on this issue. You could also contact someone at your local area agency on aging toll free at 1-800-677-1116. You can also ask your independent reverse mortgage consultant.

The bottom line is that, no, you should not have to worry about how a reverse mortgage will affect your other finances. In almost all situations, a reverse mortgage will only improve your overall financial situation. If you have any uncertainties about your specific situation, it is best to consult an expert before you sign your final paperwork. Keep in mind that it is because of questions like these you are required to have a counseling session with an independent expert on reverse mortgages. This is a good time to ask these questions.

Generally speaking, a reverse mortgage will provide you with tax free money that will not impact your Social Security or Medicare benefits. You remain the owner of your home, retaining the title, and instead of making monthly payments on a loan, you actually get money from your loan.

The benefits of a reverse mortgage should be clear by now. There are few, if any, drawbacks, as long as you educate yourself in advance and abide by your end of the deal. Keep up your home’s maintenance, pay all taxes and insurance on time, and you should live happily ever after in your own home.

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