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In a perfect world, you’ll have all the money you need for retirement, allowing you to enjoy your golden years with zero financial worries. But life has a way of disrupting even the best laid plans. Whether you’re not saving as much as you hoped or you’re facing unexpected expenses, you may need extra money in retirement. If this is the case, a Reverse mortgage Can help.
Reverse mortgages allow homeowners 62 and older to tap into them Home is equal For cash. Come with this loan Unique benefits Compared to other financing options, such as waiving mortgage payments and offering three payment options: lump sum, line of credit or monthly payments. Unless you move, sell the house or die, at which point you (or your heirs) don’t pay the lender back with interest.
you can use Reverse mortgage funds For many purposes, it is a flexible option to cover a wide range of financial needs. In this article, we’ll explore some common ways people use these funds and three uses that are worth considering in particular.
To find out if a reverse mortgage is right for you, see what you might qualify for here.
What can you use a reverse mortgage for?
There are no restrictions on how you can use your reverse mortgage proceeds. That said, common uses include:
Debt Repayment Covering Emergencies Home Renovation and Repair Ongoing Medical Expenses Supplemental Income
Travel allowance for education of children or grandchildren
Best Uses for Reverse Mortgage Funding
While the best use for your reverse mortgage proceeds depends on your situation, here are some suggestions for using each of the three payment types.
Single: Home Renovation and Repair
A lump sum payment is useful for large, one-time purchases rather than ongoing purchases (for which a line of credit or monthly payment is better). Since you must repay the entire loan amount (only the money you use) you should make sure you get the most out of the money you borrow.
One way to do this is to use the funds for home repairs and improvements, such as modifying the home to make it more accessible. If you use your reverse mortgage proceeds on your home, you may be able to deduct the interest when you sell the home.
“Interest accrued on a reverse mortgage (including the principal issue discount) is not deductible until you actually pay it off (usually when you pay off the loan in full),” the IRS says. “Furthermore, a deduction for interest may be limited because a reverse mortgage is generally subject to the home equity loan limit, which is not deductible unless the proceeds are used to purchase, construct, or substantially improve the home secured by the loan.
Line of credit: Ongoing medical care
Line of credit is suitable for regular, ongoing expenses. You get a line of credit for a fixed amount and you can withdraw funds up to that amount as needed. You only pay interest on the money you withdraw, and you can pay back the line of credit at any time without penalty, just like a credit card. Both these features can save you from charging more interest than necessary.
A common ongoing expense for seniors is medical care, including:
Medication Doctor’s visit Medical equipment Home nursingVery long service
A line of credit can provide you with the cash reserves you need to cover these expenses when they arise.
Compare your reverse mortgage options online now.
Monthly Payment: Supplemental Income
Monthly payments provide regular, predictable income, making them ideal for supplementing income you receive from Social Security benefits, investments and other sources. Additionally, the IRS doesn’t classify reverse mortgage proceeds as income, so you won’t be taxed on them as long as you live in the home.
Other sources of retirement income, such as 401(k)s and IRAs, are taxable, so you’ll lose some of your money to the government. By supplementing your income with reverse mortgage payments, you can withdraw less money from these accounts, save on taxes, and allow your retirement savings to grow.
This supplemental income can also increase your Social Security payments. As the Social Security Administration explains, if you delay receiving benefits, “you’ll receive delayed retirement credits for each month your benefits are delayed, giving you a higher benefit.”
Bottom line
A reverse mortgage can help you pay for everything from daily living expenses to major home repairs in retirement. As with any financial product, there is Advantages – Disadvantages To consider. determine If a reverse mortgage is right for you, carefully consider your needs and long-term estate goals. If you need additional guidance, a mortgage specialist can help.
MoneyWatch: Managing Your Money
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