Can I Use the Funds Received From a Reverse Mortgage Any Way I Choose?
Learn more about reverse mortgages before deciding whether or not to invest.
If you are over the age of 62 and own your own home, you may be considering a reverse mortgage. The way this mortgage works is simple: the federal government pays you a certain amount of money each month that you continue to own your home. If you occupy the home for the rest of your life, you will continue to receive payments, and will not have to give a penny back. Your heirs can refinance the mortgage or sell the house to pay the loan back after your death.
ARE THERE LIMITS ON USING FUNDS ?
For the most part, there are no limits on how to use funds received from a reverse mortgage. The only requirement is that you not use reverse mortgage funds to pay off an existing mortgage; most homeowners who owe money on a current mortgage do not qualify for the program. However, if you owe only a few hundred on your existing home, your first reverse mortgage payment can be used to clear the balance.
FUNDS ARE INCOME FOR SENIORS
One of the reasons reverse mortgages are appealing to seniors is that the funds can be used in any way the homeowner sees fit. Many seniors live on a fixed income, so a reverse mortgage payment is a welcome supplement to their income. However, the money does have to be paid back by you or your heirs if you move or die, so consider these possibilities carefully before electing to participate in the reverse mortgage program.
OTHER REVERSE MORTGAGE OPTIONS
If the idea of your heirs paying back your debt or being tied to your home does not appeal to you, there are several other reverse mortgage programs available. You may elect for a line of credit instead of a payment plan, which will leave you with less debt. You can use the line of credit for any purpose you see fit, just as you can with funds obtained from a more traditional mortgage. You can also elect to receive payments only for a specific amount of time in order to limit the amount of debt you leave behind.
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