Available to certain homeowners over the age of 62, a 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 equity conversion program, thinking it sounds like a loan against a home or some other financial decision that could incur debt. Instead, funds obtained with a Home Equity Conversion Mortgage (HECM) are only using the equity in a home. Rather than a last resort for dire circumstances, a reverse mortgage may be appropriate for many common financial concerns.
Supplemental Income
Pensions and retirement funds provide resources for those who have prepared for retirement throughout their careers. Due to life circumstances, not everyone can live on these resources and the fruits of other investments. A reverse mortgage is a common way to supplement other sources of income. Seniors do not need to take a job as receptionists or cashiers when they have an accumulation of wealth in the form of home equity. It’s important to be able to live comfortably after decades of enduring the rat race.
Health Expenses
Even those who feel well prepared for retirement can be caught off guard by rising health care costs, especially when unforeseen medical problems arise. Diagnosis, treatment, and long hospital stays are only part of the potential expense. Chronic conditions can mean years of expensive prescriptions and some level of ongoing medical treatment. Dialysis treatment, diabetic testing supplies, and other major medical expenses are more than one-time costs. Rather, a single diagnosis can completely alter a couple’s retirement prospects.
Pay the 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’ve 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 left behind after death, but it also has the practical benefit of helping to ensure that family heirlooms and other valuables are not taken away by creditors.
Renovation Financing
All homeowners know that some maintenance projects are investments and save money in the long run. Similarly, renovations such as ramps may be necessary to improve accessibility as the home’s residents age. Ultimately, retirement means more time at home for many seniors, and it doesn’t make sense to put off projects that have already been delayed for years. A HECM can be used to cover the costs of renewals without depleting other accounts or skimping on living expenses.
Homeowners should be aware of the many potential uses for a reverse mortgage. Instead of relying on a pension or a trickle down of funds from investment returns, a HECM allows homeowners to live more comfortably and solve financial problems by tapping into accumulated capital.
