There are many benefits to obtaining a reverse mortgage on your property in your senior years both monetary and non-monetary. Here are some to consider.
In case you have never heard of a reverse mortgage it is type of loan that allows you to convert some of the equity in your home (property) into cash. It is different than a traditional second mortgage or home equity loan because no repayment is required until you die or no longer use the property as your primary residence.
Financial Benefits of Taking out a Reverse Mortgage
While taking out a reverse mortgage does in fact put you in debt where your might not have been before it also gives you some financial benefits. Whether you choose a lump sum payment or monthly installments, you will be getting a little bit back out of your house. It is true the loan will rise each month instead of decrease like a normal mortgage but this is not necessarily a bad thing. The extra money you get each month can be invested and possible actually make some more money for you. It can save you lots of money in interest charges if used to pay off credit cards with high interest rates.
The Tax Benefits
The transfer of a capital asset in the case of a reverse mortgage is not regarded as an actual transfer (from yourself to the company that will hold the title) so it does not attract capital gains tax. Also any amount of money your receive, either in installments or in a lump sum in the process of a reverse mortgage is not regarded as income and therefore is not eligible for income tax.
Are There Any Other Benefits?
While there are many financial benefits to taking out a reverse mortgage the best benefit of them actually is piece of mind. Reverse mortgages give you the peace of mind of not having to worry about paying monthly home tax and utility bills as it can help out toward those. It also can help with the more simple things you need each month like food or medication.
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