Make money last: Consider a reverse mortgage


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Jean: Some people are more afraid of running out of money than they are of dying.

Jane: Oh, I think that’s true. It’s a huge existential fear. But the fact is that most people are going to be able to do it. They simply have to know how to stretch it out, what kinds of instruments to use.

Jean: Are there other ways to get at it?

Jane: Well, of course, there’s the reverse mortgage.

Jean: Okay, so let’s talk about reverse mortgages, because for a long time, reverse mortgages were you-don’t-want-to-go-there territory.

Jane: It’s a risky thing to do to do a reverse mortgage later in age when you’re basically broke. It’s a very interesting thing to do when you’re younger. You have to be 62 to qualify.

So you’re 62 and you say I’m going to want to stay in my house for the next 20, 30 years. So you take the reverse mortgage against your house in the form of a credit line. And the magic of a credit line with a reverse mortgage is that it increases every year by the interest rate and the insurance fee. You’re not actually paying this interest. It builds up inside the loan. So that beautiful credit line sits there, not costing you anything else.

In 10-15 years from now, you may have a huge credit line against your house that you can use to help pay your bills. It’s a brand new use of the reverse mortgage. I know it sounds a little complicated, but it’s absolutely worth considering it, if you want to stay in the house for a long time, and you know you’re going to need some more money than you have, other than your savings.