What are Reverse Mortgages Used for?

I often get questions about why someone would take out a reverse mortgage. I think I am asked this question because they simply don’t understand the details of the program. Remember, a reverse mortgage is not a wealth creating financial tool. In fact, it is what we refer to as an “Equity-Consuming” product.

Think about it . . . . fixed income combined with increased taxes, gas, bills, food, medical expenses, family . . .  the list goes on. When financial obligations increase, it leaves less and less discretionary money for other things. This is when an equity consuming loan combined with low risk becomes a great tool.

Financial Freedom,  the largest reverse mortgage provider in the U.S. and a subsidiary of IndyMac Bank, has gathered some information as to what people typically use a reverse mortgage for. You will find the results below:

Hospital/Health Care Costs – 67%
Payoff Existing Mortgage – 55%
Reduce Burden on Children – 50%
Home Improvement/Repair – 50%
Pay Property Taxes – 38%
Daily Expenses – 29%
Travel/Something Special – 14%
Gifts – 3%

Notice that the majority of the items above are more about “peace-of-mind” than anything else. Have a good day!

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