The proceeds you receive from your reverse mortgage can be used to fund anything you want. There are no restrictions to how you can spend your money. This is your money that you are free to use however you want. Whether you want to set that money aside and save it or invest it into something else, that is entirely your choice. This article here explores different ways you can use your reverse mortgage funds.
Pay Off Any Bills You Have an Outstanding Balance On
Once you receive the funds for your reverse mortgage, you may want to consider paying off any bills or remaining debt you have. If you have a car payment, it may be a good idea to use some of those funds to lower that payment or completely pay it off. Paying off outstanding balances allows you to save more money and spend it in other ways that you may not have gotten a chance to before.
Invest In Your HealthCare
It is quite common among seniors who reach the retirement age to want to continue living in their home without relocating to an assisted living facility. Doing so is costly when you take into consideration that as a person ages, their needs tend to become more complex. In order to accommodate them, there will have to be money invested. Seniors typically will need a walker or a chair to sit in the shower. Medical equipment is expensive so having funds from a reverse mortgage can help ease the financial burden on those who are wanting to stay in their homes and not relocate to an assisted living facility.
Update Your Home to Become More Accessible
As mentioned previously, seniors who reside in their home may need to invest in medical equipment to be able to move safely around their home. In some cases, a person’s home may need to be completely updated in order to be safe for the senior. For instance, using the stairs may not be the safest option for those who are having issues with their hips and knees. Having a stairlift installed would make it safer for the seniors to move around in their home. These appliances can cost up to a couple thousand dollars to purchase. Using funds from the reverse mortgage would be a great way to increase the safety measures in your home that way you or your loved ones can stay in your home without having to worry about potential injuries arising.
Plan a Trip with Your Loved Ones
Sometimes, you may want to use your funds for something fun and relaxing rather than just investing into other avenues. If that is the case, then checking out vacation destinations with your loved ones may be a good idea. Think about what destination you’d like to go to and compare the prices to what you will receive for your reverse mortgage. Some popular areas to look at can include all inclusive resorts. This way, you don’t have to worry about paying additional fees. A trip is something worth considering after talking with your loved ones when you receive your reverse mortgage funds. For some people, traveling is something they want to do with their spouse when they reach retirement age.
Help Out Your Loved Ones
You can also use the equity in your home to help out others if you feel like you are in the position to do so. Some folks like to help their grandchildren out with their college tuition, or help their recently married kids put a down payment on their home. It is completely up to you if this is the route you decide to go down.
Reverse Mortgage Loans Are Tax Free
The fortunate part about reverse mortgage loans is that they are tax free. If you are thinking of withdrawing from your 401k, or other retirement plans, you can instead use your reverse mortgage money. Your money that you receive from reversing your mortgage is not income you received through work. Therefore, the Internal Revenue Service (IRS) won’t need to check your proof of income regarding the reverse mortgage. Since the money will need to be repaid at a later date, the proceeds are simply looked at as loan advances. Essentially, the money isn’t taxed because the lender returns the money paid through mortgage payments in exchange for the equity you have built up in your home.
Sources:
https://longbridge-financial.com/reverse-mortgage-101/how-you-can-use-it/
https://longbridge-financial.com/blog/reverse-mortgages/are-reverse-mortgages-taxable/
