The reverse mortgage's benefit is that it allows homeowners who are age 62 and over to keep living in their homes and to use their equity for whatever purpose they choose. A reverse mortgage might be used to cover the cost of home health care, or to pay off an existing mortgage to stop a foreclosure, or to support children or grandchildren. Reverse mortgages are now available in every state except Alaska, South Dakota and Texas. But willing lenders may still be scarce in some places. When the homeowner dies or moves out, the loan is paid off by a sale of the property.
Any leftover equity belongs to the homeowner or the heirs.
The deductibility of interest has been limited in recent years. As the loan is paid off the limit is reduced. In other words you can not refinance a loan for a higher amount than the current principal balance and increase the deduction. Interest expense incurred for a trade or business is deductible against the income of that business. Investment interest is deductible up to the amount of investment income.