Mortgage Registry Tax Reverse Mortgage

A reverse mortgage or home equity conversion mortgage (HECM) is a special type of home loan for older homeowners (62 years or older) that requires no monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner's insurance.

The taxable principal debt amount under a reverse mortgage is the expected total disbursements (or cash equivalent) which will be made throughout the course of the reverse mortgage.  View the law, Minnesota Statute 287.05, subdivision 6.

In Minnesota, numerous types of reverse mortgages are offered both by private lenders alone, and by private lenders who are participating in national reverse mortgage offerings such as the HUD home equity conversion mortgage (HECM).

The expected total disbursements for all reverse mortgages except HECMs include the sum of all cash advances that are allowed to be paid to the borrower under the agreement, plus any costs financed in the mortgage instead of being paid out-of-pocket by the borrower at the closing. For a HECM reverse mortgage, the expected total disbursements do not include interest costs, insurance premiums, service fees, or amounts to be paid to the borrower by HUD.

Minnesota lenders who take reverse mortgages should include specific language on the mortgage document to clearly indicate the basis of the MRT and the amount of the MRT due. 

Example: 

Mortgage Registry Taxable Amount: $141,000 (Expected total disbursement minus interest, mortgage insurance premium, and lender service fees).