Article Date:
February 2022

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Using a Reverse Mortgage as a Tax Planning Tool

If you’re an “experienced” homeowner, age 62 or older, you may need to tap into your home equity because you are “house-rich but cash-poor.”


If so, you are not the only one.


But what are your options? You can solve this cash shortfall problem and reap big tax-saving bonuses if you follow the reverse mortgage strategy explained in this article.


Here’s what you need to know about reverse mortgages and the tax angles.


Reverse Mortgage Basics


With a reverse mortgage, you as the borrower don’t make payments to the lender to pay down the mortgage principal over time. Instead, the reverse happens: the lender makes payments to you, and the mortgage principal gets bigger over time.


Interest on the reverse mortgage accrues, and it’s added to the loan balance. You don’t have to make any interest or principal payments until required to do so under the terms of the loan. Typically, no payment is due until you pass away or permanently move out of the home.


You can receive reverse mortgage proceeds as a lump sum, in installments over a period of months or years, or as line-of-credit withdrawals. After you pass ... Log in to view full article.

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