Is there any tax issue involved if anyone opts for a reverse mortgage loan?
A reverse mortgage loan allows a senior citizen above 60 years to receive a regular income against mortgaging of a self owned and self occupied home. Since the money received through a reverse mortgage loan is considered to be a loan and not any income, the money is free from any tax liability.
There are no taxes applicable for reverse mortgage. According to these guidelines, a senior citizen who is above 60 years of age is eligible to apply for a reverse mortgage loan and avail 60%-80% of the value of the residential property they reside in and retain the right to continue to reside there. The maximum tenure for this loan scheme is 15 years.
The bank is allowed to re-evaluate the property once every five years and apply the changes to the loan amount. At the end of 15 years, the borrower can continue to live in that house but will not be eligible for further disbursement of the periodic payments from the bank, if that has been the case. Taxes will not be applicable in this case too.
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