Understanding Property Taxes and Reverse Mortgages in Idaho

Understanding Property Taxes and Reverse Mortgages in Idaho

Idaho is a state known for its stunning landscapes, thriving communities, and a high quality of life. It’s a place where many people, including retirees, choose to settle down and call home. However, when it comes to managing the financial aspects of homeownership, it’s essential to understand the intricacies of property taxes and how they relate to financial tools like reverse mortgages. In this comprehensive guide, we will delve into the world of property taxes in Idaho, and how reverse mortgages can be a viable financial solution for homeowners, especially those who are retired or approaching retirement.

Demystifying Property Taxes in Idaho

The Basics of Property Taxes

Property taxes are a vital source of revenue for local governments in Idaho. These taxes fund essential public services like schools, infrastructure development, public safety, and more. Understanding how property taxes work in Idaho is crucial for all homeowners.

In Idaho, property taxes are determined based on the assessed value of your property, which the county assessor’s office determines. The assessed value is then multiplied by the local property tax rate to calculate your property tax bill. The local tax rate may vary from one area to another within the state.

Property Tax Exemptions in Idaho

Idaho offers several property tax exemptions that homeowners can benefit from, particularly for seniors and disabled individuals. Two notable exemptions include:

Circuit Breaker Property Tax Reduction Program

This program provides financial relief to low-income seniors and disabled individuals. It helps reduce the property tax burden for those who qualify, ensuring that homeowners with limited income can continue to afford their homes.

Property Tax Deferral Program

The Property Tax Deferral Program allows eligible homeowners to defer some property taxes, effectively reducing the financial burden on fixed-income individuals. Taxes deferred through this program accrue as a lien on the property but do not have to be repaid until the property is sold or transferred.

Reverse Mortgages – An Introduction

What is a Reverse Mortgage?

A reverse mortgage is a financial product designed to help homeowners aged 62 or older convert a portion of their home equity into cash. Unlike traditional mortgages, reverse mortgages do not require monthly mortgage payments. Instead, the loan is repaid when the homeowner sells the property, moves out, or passes away. Here’s how it works:

  • Homeowners can receive funds in various ways, including a lump sum, monthly payments, or a line of credit.
  • The loan amount, plus accrued interest, becomes due when the homeowner is no longer lives in the home.
  • The homeowner retains ownership of the home, and it remains their responsibility to maintain it and pay property taxes and insurance.

Types of Reverse Mortgages

In the United States, there are three primary types of reverse mortgages:

Home Equity Conversion Mortgage (HECM)

HECMs are the most common type of reverse mortgages. They are insured by the Federal Housing Administration (FHA) and offer various disbursement options, making them flexible for homeowners. HECMs also come with certain consumer protections.

Proprietary Reverse Mortgages

These are privately offered reverse mortgages, and they are not subject to the same regulations as HECMs. Proprietary reverse mortgages may offer higher loan limits for homeowners with expensive homes.

Single-Purpose Reverse Mortgages

These are usually offered by state or local government agencies or non-profit organizations. They are designed for specific purposes, such as paying property taxes or repairing homes.

businessman giving contract to woman to sign

Reverse Mortgages and Property Taxes in Idaho

Property Taxes and Reverse Mortgages Compatibility

When considering a reverse mortgage in Idaho, it’s essential to understand how property taxes fit into the equation. While reverse mortgages can provide financial relief for homeowners, they do not exempt homeowners from their property tax obligations.

Under a reverse mortgage, homeowners remain responsible for paying their property taxes, homeowner’s insurance, and maintaining the property. Failure to meet these obligations can lead to foreclosure, putting the homeowner’s tenure at risk.

How Reverse Mortgages Can Help with Property Taxes

Despite homeowners remaining responsible for property taxes, reverse mortgages can offer a lifeline for those struggling to meet their financial obligations, especially property taxes. Here’s how:

Additional Income Stream

One of the primary benefits of a reverse mortgage is the additional funds it provides. Homeowners can use this extra cash to cover property tax bills and other essential expenses.

Line of Credit Option

A reverse mortgage’s line of credit feature can be a strategic way to manage property tax payments. Homeowners can establish a line of credit, then draw from it as needed to cover tax bills, preventing financial strain.

Peace of Mind

For retirees on fixed incomes, property taxes can be a significant concern. A reverse mortgage can provide peace of mind, knowing they have the financial resources to handle these expenses.

The Pros and Cons of Reverse Mortgages in Idaho

The Pros

Access to Home Equity

Reverse mortgages unlock the wealth in your home, allowing you to use it for various purposes, including property taxes, home improvements, medical expenses, or simply improving your retirement lifestyle.

No Monthly Mortgage Payments

Unlike traditional mortgages, reverse mortgages do not require monthly payments. This can be a significant relief for homeowners on a fixed income.

Retain Ownership

You still own your home, and you can live in it as long as you want, provided you meet the loan terms and maintain the property.

The Cons

Loan Costs

Reverse mortgages typically come with higher upfront costs and fees. These costs can erode the initial amount available to you.

Accrued Interest

Interest accrues on the loan balance over time, which can reduce the amount of home equity available to you or your heirs when the loan becomes due.

Potential Impact on Heirs

Upon the homeowner’s passing or when the home is sold, the reverse mortgage becomes due. This can impact the inheritance you leave for your heirs.

Considerations for Reverse Mortgage Borrowers in Idaho

Independent Counseling

Before taking out a reverse mortgage, it is a requirement to attend independent counseling. This counseling ensures that you fully understand the implications and responsibilities associated with the loan.

Shop Around

When exploring reverse mortgage options, it’s wise to shop around and compare offers from various lenders. Different lenders may have different terms and fees, so take the time to find the best deal.

Maintain Property and Pay Taxes

To prevent the risk of foreclosure, ensure you keep up with property tax payments and property maintenance. It’s a crucial responsibility for reverse mortgage borrowers.


Our Lending Team has been serving our clients since 2004. We are passionate about serving our clients with integrity to help them achieve their financial goals.

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