What not to do with your Reverse Mortgage Money

You have finalized the reverse mortgage deal, you did all the analysis and comparison which one will suit you best and now you have the money in your hand. Suddenly, there are lot of possibilities which open in front of you – what you can do with that money. This is especially true when payments are done on a lump-sum basis rather than on a disciplined monthly basis. Money to all is intoxicating, it gives a sense of power and that's where many make mistakes in investing / spending it in ways not appropriate.


First of all if you are confused what to do with the money after you have received you have already committed a mistake as reverse mortgage should be taken with a clear purpose in mind and spending plan.

Even if you had not thought deeply about it, there are a few areas you should definitely avoid:

  • Avoid investing in things you don't understand: This simple rule has to be followed religiously with your mortgage money. If you have never invested inequities in your life, then this would not be the right time to start.
  • Greed is your biggest enemy: Greed indeed is your biggest enemy at this stage. With little additional income and rising costs all over last thing you can do is invest your much needed money looking for stellar returns. Always remember – if it looks too good to be true, IT INDEED IS. Avoid
  • Life insurance policies: Life insurance policies make little sense at that age. Life insurance instruments is primarily for insuring the "bread earner" of the family, on which everyone depends upon. After 62 years, this is mostly not the case. Secondly, Premiums of policies at this age are huge and are not worth of the hard earned reverse mortgage money you have received. Life insurance policy might be appropriate in case you have significant wealth and complicated estate issues – but this is not the case with most reverse mortgage customers.
  • Avoid things you do not need: Why buy a luxury car when you do not drive one, a expensive suit when you have little or no outings? It's wise to spend money to satisfy all the genuine needs first and then evaluate how to spend the rest.

One important step in planning (if you find yourself unable to do it) is to get in touch with a trusted financial planner. He should be able to advice you on investments and Do's and Don't. But beware of the planners who start suggesting you what all you can do with the huge amount of money you can do. Many of them can lead you to wrong investments if you do not understand a instrument fully its best not to invest.