Reverse Mortgage Loan Blog

DEAR BRUCE: I am 80, and my wife is 79. We live in Las Vegas. Our home has an estimated value of $450,000 and rising. We have been supplementing our income with some stock liquidations that have additional fees. Do you think we’re candidates for a reverse mortgage? Would the bank charge interest at some fixed rate? Would these reverse-mortgage receipts be subject to income tax? We haven’t talked to a bank yet. We wanted your advice first so that we don’t stumble into a bad deal. – Reader, Las Vegas, Nev.

DEAR READER: A reverse mortgage might very well serve you and your wife. You both have reached the age where reverse mortgages have much to recommend them. Simply, a reverse mortgage is borrowing against the equity in your home, and the debt will be retired upon your passing. The older the person taking the loan (i.e., the lower the life expectancy), the higher the payout. Since this is borrowed money, there are no taxes on it whatsoever. The lender will charge a previously agreed-upon rate of interest. The largest argument against a reverse mortgage is that it uses capital that some people would like to leave to their heirs. In my opinion, this is no argument at all. You earned the money; there is no reason why you shouldn’t enjoy it.

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