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Paula Said:

reverse mortgage?

We Answered:

Homeowners who own their homes outright may in certain states cash in on their equity by taking a reverse mortgage. Typically, 80% of the value of the home is paid by a bank to a homeowner in a lump sum or in installments. Principal is due when the home is sold or when the homeowner dies; interest is added to the loan and is payable when the principal is paid. The IRS has ruled that an interest deduction may be claimed by a cash-basis homeowner only when the interest is paid, not when the interest is added to the outstanding loan balance.