What can you do with money from a Reverse Mortgage?
Once considered a last-resort source of income, reverse mortgages are becoming more popular as a retirement financial planning tool. In essence, a reverse mortgage, also called a home equity conversion mortgage (HECM), is a home equity loan designed to help seniors access the equity in their homes to supplement their incomes. The home owner, who must be 62 years of age or older and have substantial home equity, receives payments from the lender. The homeowner does not need to make payments back to the lender as long as he or she uses the home as a primary residence. The loan is repaid after the borrower no longer uses the home as their primary residence. While the original intention of a reverse mortgage was to help financially strapped seniors stay in their homes, essentially, borrowers can use the proceeds from a reverse mortgage for most anything.
Here are a few ideas:
Eliminate Existing Mortgage or Purchase a New Home
It’s not uncommon for seniors living on a fixed income to use credit cards or personal loans to pay for daily living expenses, medical expenses, taxes, etc., which can lead to financial devastation. In addition to paying off an existing mortgage, borrowers can pay off credit cards or other high-interest loans using the proceeds from a reverse mortgage.
Pay Off Debt
It’s not uncommon for seniors living on a fixed income to use credit cards or personal loans to pay for daily living expenses, medical expenses, taxes, etc., which can lead to financial devastation. In addition to paying off an existing mortgage, borrowers can pay off credit cards or other high-interest loans using the proceeds from a reverse mortgage.
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Unexpected Expenses
One of the biggest risks to a retirement plan is unexpected medical expenses. As Medicare continues to limit coverage, and healthcare costs increase, a reverse mortgage can be a viable solution to cover healthcare expenses and services and a long term care insurance policy. In addition, home modifications like widening hallways, adding a wheelchair ramp, or installing an elevator or stair glide may also be paid for by a reverse mortgage.
College Expenses
Higher education costs are a major expense to most families. For seniors who want to help their grandchildren or their children succeed, a reverse mortgage may be right the right solution to help with tuition, text book fees, and living expenses. Unlike student loans, reverse mortgages may provide a tax-free option. Talk to one of our loan professionals or your tax adviser for more information.
Travel
Traveling is a priority on many seniors’ bucket lists. For those who have dreamed of traveling the world or cruising the Bahamas, reverse mortgage proceeds may be used to pay for tickets and hotels, and even purchase a travel trailer or camper.
Learn More
These are just some examples of how the money received from a reverse mortgage loan can be used. To understand all the ways a reverse mortgage can work as a financial planning tool, consult with one of our friendly and experienced reverse mortgage professionals.
Related topics:
The History of Reverse Mortgages
What Property Types Qualify for Reverse Mortgages?
Reverse Mortgage Counseling
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry is constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.