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Level 2
January 17, 2021

Reverse Mortgage Loan Interest

  • January 17, 2021
  • 2 replies
  • 13 views

With a reverse mortgage loan, we know that interest is not tax deductible until actually paid. For example, a paydown on the loan balance would generate some paid interest. Question: If a borrower with a reverse loan refinances it for a higher loan amount, is there interest considered paid on the old loan at the time of the re-fi? Thank you.

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    2 replies

    IRonMaN
    Level 15
    January 17, 2021

    Do the loan documents show that interest was actually paid.  Did they receive a 1098?

    Slava Ukraini!
    Level 2
    January 17, 2021

    Don't have the doc.s yet. Transaction was in 2020 so too early to receive any 1098 form.

     

     

    rbynaker
    Level 13
    January 17, 2021

    Keep in mind the tracing rules.  Even if interest is paid, the only interest deductible would be that which is allocated to the principal amounts borrowed that were used to buy, build or substantially improve the residence.