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I am a 65-year-old, semi-retired single female. Because of my personal and financial situation at the time, I started collecting my Social Security. I needed it to supplement my part-time income in order to just live. It’s not much — under $600.
The problem is, the family-owned business I have worked at for a very long time is in danger of closing. To complicate matters, I live quite a distance from any city large enough to find more part-time work.
I have very little savings but own my home. Would a reverse mortgage work for me? Any other suggestions?
-N.
Dear N.,
Tom Selleck makes it sound so simple in those AAG commercials where he touts reverse mortgages as a way for seniors to have a secure retirement while staying in the homes they love.
Of course, it’s safe to assume that Selleck — whose estimated net worth is $45 million — isn’t in need of the product he’s shilling. But it’s easy to understand the appeal of a reverse mortgage for average senior citizens.
Consider that about 48% of households headed by someone age 55 or older had nothing saved for retirement, according to a 2019 report from the US Government Accountability Office. But about 82% of people age 65 and up own a home.
That means there’s a good chance many seniors will use their home equity to fund at least part of their retirement with a reverse mortgage. But there are some risks you need to be aware of before you pursue one.
First the basics on reverse mortgages: They’re available to homeowners age 62 and older who own their homes outright or have significant equity.
With a regular loan, you’d make regular payments to the lender, but with a reverse mortgage, your lender makes payments to you. They can come in the form of a lump sum, monthly payment, line of credit or a combination.
Interest is tacked onto your loan balance, which isn’t due until you die, sell the home or move out.
As you receive payments, your equity…
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