Four ways to use your reverse mortgage payments
Available to certain homeowners over age 62, the Federal Housing Administration reverse mortgage can be used to meet the needs of seniors in a variety of financial situations. Some people may be reluctant to apply for this type of home equity conversion program, thinking it sounds like taking out a home equity loan or some other financial decision that could lead to debt. Instead, the funds earned with a home equity conversion mortgage (HECM) use only the equity built up in the home. Rather than a last resort in dire circumstances, a reverse mortgage can be suitable for many common financial problems.
Pensions and retirement funds provide resources for those who have prepared for retirement over the course of their careers. Due to life circumstances, not everyone can live off these resources and the fruits of other investments. A reverse mortgage is a common way to supplement other sources of income. Seniors should not take a job as a receptionist or cashier when they have accumulated wealth in the form of home equity. It’s important to be able to live comfortably after decades of enduring the rat race.
Health care costs
Even those who feel well prepared for retirement can be caught off guard by rising health care costs, especially when unforeseen medical issues arise. Diagnosis, treatment and long hospital stays are only one side of the potential costs. Chronic conditions can mean years of expensive prescriptions and some level of ongoing medical treatment. Dialysis treatment, diabetes test supplies, and other major medical expenses are more than one-time expenses. Rather, a diagnosis can completely change a couple’s retirement prospects.
Paying off debt
While credit cards are convenient and sometimes necessary, interest rates can be especially problematic for those who no longer work full-time. Whether they spent money on grandchildren, family reunions, or practical expenses like utility bills, many seniors find themselves with debt that needs to be resolved in a timely manner. Settling financial affairs is one way to minimize the mess that will be left after death, but it also has the practical benefit of helping to ensure that creditors do not seize family heirlooms and other valuables.
Financing of repairs
Every homeowner knows that some maintenance projects are investments and save money in the long run. Likewise, renovations such as ramps for improved accessibility may be needed as the home’s residents age. After all, retirement means more time at home for many seniors, and there’s no point in putting off projects that have already been put off for years. A HECM can be used to cover renovation costs without draining other bills or saving on living expenses.
Homeowners should be aware of the many potential uses of a reverse mortgage. Instead of depending on a pension or trickles of investment returns, a HECM allows homeowners to live more comfortably and solve financial problems by taking advantage of accumulated equity.
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