Common Use of Reverse Mortgage Funds

By: Michael Branson

As I talk to borrowers and their families, I'm often asked what restrictions there are on the use of the funds from a reverse mortgage. The answer is simple, there are no requirements or restrictions on what you can do with your money, only restrictions against what you must do with the proceeds.

In other words, no lender can grant you a reverse mortgage on the condition that you purchase annuities with the money or that you have a prior agreement with
someone that you must use your funds for any other type of investment. Obviously, this does not include all loans and other liens against the property, those would have to be paid in full to protect the lenders lien position.

So now that you have paid off all the loans or didn't have any to pay off, what ARE you going to do with your reverse mortgage proceeds? Well, you can use the money to have a monthly payment sent to you for life. If you are looking for additional monthly income for living or medical expenses many senior homeowners elect a monthly payment to augment their income so that they can better afford the rising costs of living, pay taxes and insurance, pay for prescription drugs or even give themselves a little breathing room so they can better enjoy their lives.

Then there are those borrowers who say that they don't need any help on their monthly obligations. To that I say you may not be a candidate for a reverse mortgage but then again, maybe you still are! I'm a mortgage banker/mortgage broker by trade and I would always suggest that before you make any decisions affecting your home that you seek the competent counsel of a professional in the area you wish to explore, but lately I've had more seniors who have come to me with plans they received from their tax and estate planners, information regarding college needs of family members and other investments. Don't get me wrong, I am NOT advocating any investments or schemes.

However, I have seen how plans have been put together allowing for investment, annuities and life insurance policies that actually allowed the senior borrower to put the dormant equity to work for them while still employing a method by which the mortgage was paid off with a life insurance policy.

Then there are those borrowers who just want to get out and travel, spend their time at an activity which may require more capital than they were comfortable expending without their reverse mortgage or wanted to help children and grandchildren fulfill their dreams. Again, I always recommend that senior borrowers find competent counsel but reverse mortgages aren't just for those who are House Rich and Cash Poor and may be the right choice for you.

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