Straight talk on reverse Mortgages

Question: Do I owe tax on payments I receive from a reverse mortgage? S.S., Hinsdale, IL

Answer: No.

With a reverse mortgage, you tap into the equity in your home while you continue to live there. The reverse mortgage lender makes payments to you based on the home’s value. Your reverse mortgage loan balance increases over time, which is the opposite of what happens with a conventional mortgage where your loan balance goes down as you make payments. That’s why it’s called a reverse mortgage! Because the reverse mortgage payments that you receive from the lender are borrowed money, the payments are not taxable income. For some homeowners who need money for retirement, a reverse mortgage might be a viable option. However, it should be noted that reverse mortgage fees are usually higher than fees for a conventional mortgage.