What Can Reverse Mortgage Funds Be Used For?

Sellers’ markets are a great environment for homeowners interested in reverse mortgages. In this type of market, home values are up and homeowners 62+ are able to tap into even more home equity. Also know as HECM (Home Equity Conversion Mortgage) loans, reverse mortgages are ideal for retirees who may not have a lot of cash savings or investments but do have a lot of wealth built up in their homes. A reverse mortgage allows you to turn an otherwise illiquid asset into cash to cover expenses in retirement. Proceeds can be used for almost any purpose you wish. A reverse mortgage can help provide financial flexibility and relieve many financial pressures. The funds can allow homeowners to: 

#1 Pay Bills

Reverse mortgages eliminate monthly housing payments. With no monthly mortgage payments required*, homeowners can redirect their money to pay everyday expenses, high-interest credit card balances, an existing mortgage, and/or other debts. 

#2 Cover Healthcare Expenses 

Medical debt with billing From unexpected surgeries to prescription drugs, many seniors are finding that their insurance and/or government benefits are unable to fully cover their medical needs. A reverse mortgage may be a good solution for seniors who have substantial equity in their homes and need to access cash to help cover medical expenses. 

#3 Postpone Taxable Withdrawals from Retirement Accounts

Like any loan, reverse mortgage proceeds are paid out tax-free as they are not considered income. Instead of making taxable withdrawals from a retirement plan such as a 401(k), seniors can supplement this money with tax-free proceeds of a reverse mortgage. This can also help the retirement accounts continue to grow due to the withdrawal delay.

4. Make Home Updates

Middle aged man repairing burst pipe,plumbing, focus on foregroundLike all mortgage loans, the home is secured by a lien and remains in the homeowner’s name as long as they comply with the loan terms*. Many retirees want to “age in place” in the comfort of their own homes. Making much-needed modifications or repairs to a home can help with comfort and improvement of quality of life. The proceeds of a reverse mortgage can help make those home improvements more affordable and attainable.

5. Plan for the Future

Unexpected expenses can really be a financial setback. Many people don’t have enough savings to cover surprise situations that come in life. A reverse mortgage can come in the form of a line of credit that can help homeowners prepare for unforeseen situations while protecting their financial future.

6. Help Others

The benefits of a reverse mortgage don’t have to stop at the homeowner. The proceeds from a reverse mortgage transaction can be used for almost anything the owner(s) wish to use it for. For example, a homeowner can use the proceeds to put a grandchild through college or to help their adult children put a down payment on a home. 

From paying off a mortgage to creating consistent monthly income to smarter tax planning, a reverse mortgage can unlock home equity for a more secure retirement. When deciding what to do with the proceeds of a reverse mortgage, prudence along with budgeting should be the proper approach to enjoying these funds. 

Click here to talk to one of our Mortgage Experts to see what loans you qualify for!

*Homeowner(s) must live in the home as their primary residence, continue to pay required property taxes, HOA fees and homeowners insurance, as well as maintain the home according to Federal Housing Administration requirements.
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