How to use a reverse mortgage to supplement income, make home improvements and enrich your lifestyle.
Reverse mortgages are a specific type of loan available to seniors aged 62 and up who own their own homes. This type of lending program allows you to borrow against the equity you have put into your home, with no repayment of the funds until you leave the residence you’ve borrowed against. There are many reasons seniors may be interested in obtaining extra funds through a reverse mortgage, but what type of restrictions are there on the allocation of the funds?
Initial loan requirements
In general, there are only a few factors which determine eligibility for a reverse mortgage. You must be 62 years of age or older, and you must own and reside in the property to be mortgaged. In most cases, programs and lending institutions prefer that your existing mortgage for the home has been paid off. It is possible to receive a reverse mortgage for homes with a low balance on an existing mortgage. However, in this case a portion of the funds from the new loan must be used to pay the existing mortgage.
Common uses for reverse mortgage funds
Many seniors choose to take out a reverse mortgage for a specific purpose. The funds from the loan may be used to make home improvements, to supplement income from Social Security, IRAs or other retirement packages, or to provide a financial cushion. In most cases, provided the existing mortgage has been paid in full, the funds from a reverse mortgage can be used for any purpose the borrower would like. The funds can be invested or rolled into savings or CDs, or used for travel or vacations, or anything else you choose.
Exceptions
Certain programs and lending institutions offering reverse mortgages require the funds to be allocated for a specific purpose. These programs are typically low-cost “public sector” loans offered by local and state governments to help seniors pay for property taxes or home repairs.
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