Q. My father is contemplating a reverse mortgage. Will he have to pay tax on the deal? E.C., Indianapolis
A. No. With a reverse mortgage, the homeowner generally receives payments or a lump sum from a lender based on age and life expectancy, the current value of the home and other factors. The payments are treated as a tax-free return on investment. But the loan must be repaid, with interest, when the homeowner moves, sells the home or passes away.
Tip: A reverse mortgage typically comes with strings attached, although the 2008 housing law limits such fees.