3 Convenient Ways to Utilize a Reverse Mortgage

3 Convenient Ways to Utilize a Reverse Mortgage

By Daniel Duffield

Reverse mortgages can be confusing for many borrowers, with many unique features that do not appear in other popular loan programs and the opposite function of a standard mortgage. While many understand that this transaction taps into home equity, many borrowers view these mortgages as disadvantageous due to the potential consequences and do not fully understand the utility of a reverse mortgage. To help senior homeowners to better understand the beneficial uses of this program, this article will examine three of the most convenient and advantageous uses of reverse mortgages.

1.       Influence heirs’ inheritance.

For many seniors, home equity comprises a large portion of the inheritance which they pass on to their heirs. While many seniors may be confident that this inheritance will be put to a beneficial use rather than squandered, most will not have any control over how the inheritance will be used. For instance, if a borrower’s granddaughter has wanted to use the money for unnecessary and expensive plastic surgery, seniors will be unable to prevent this misuse. However, reverse mortgages give seniors more control over what inheritance will be passed on.

For instance, by performing a reverse mortgage to tap the equity within a home, senior homeowners may apply this money toward a child or grandchild’s college education, even without having to sell or move from the home. Likewise, reverse mortgage borrowers may apply these funds in any way which they see fit and avoid any misuse of the inheritance.

2.       Take care of oneself.

With exorbitant health care costs draining many senior homeowners’ budgets, many borrowers secure a reverse mortgage in order to acquire additional income to pay off medical bills. If expensive procedures or care is required, senior homeowners may need these additional funds to avoid passing on debts to heirs.

Although family members may be willing to assist in caring for a senior relative, this can become complicated by a number of factors, especially if the senior lives some distance away from his or her heirs. With a reverse mortgage, senior homeowners can retain this independence and use these funds for self-care, thus avoiding becoming a burden. Whether hiring a caregiver or using the funds to purchase a long-term health care insurance plan, reverse mortgages allow these borrowers a degree of independence and peace of mind without inconveniencing family members.

3.       Avoid foreclosure.

While it may sound too good to be true to secure a reverse mortgage in order to avoid a detrimental foreclosure, this process is not only possible but an effective way to apply a reverse mortgage. With no reverse mortgage qualifications regarding borrower credit, senior homeowners can be undergoing foreclosure or completing a bankruptcy and still manage to qualify for and acquire a reverse mortgage.

In order to perform a strategic reverse mortgage to avoid foreclosure, a senior homeowner must have a sufficient amount of equity stored within his or her property. Essentially, this process benefits homeowners who cannot afford to finish paying off the original mortgage; by tapping into the accumulated equity, borrowers can apply these funds toward the remaining balance of the mortgage and collect the remaining equity.

Although these three applications can greatly benefit reverse mortgage borrowers, senior homeowners can benefit from reverse mortgages in a variety of ways, based on their unique circumstances. 

However, regardless of the situation, borrowers should learn as much as possible about reverse mortgages prior to making any commitments. Remember, a reverse mortgage affects not only the borrower but the heirs, so discuss this option with family before signing any papers.

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