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Starting Jan 1, 2009, reverse mortgages were allowed to be used to purchase a home, and not just to pull equity out of an already owned home. If the reverse mortgage is a purchase mortgage (uncommon, but possible), the commentary about reverse mortgages being subject to the Home Equity Debt limits would be moot, and all interest applied to the loan would be deductible in the year that the loan is paid off.

For the purchase amount, anyway. If the loan also allowed additional draws (perhaps there was a significant down payment at purchase), the interest on those draws would be home equity debt rather than purchase debt. Unless the draw was used to improve the home, of course.

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