Q:

At age 70, Fiona lives alone, owns a house valued at $350,000, and has paid off the mortgage completely. Fiona has no other assets to live on. She can choose a reverse mortgage that gives her payments of $32,000 a year for 10 years or one that pays her $20,000 a year for as long as she lives in the house. Fiona opts for the $32,000-a-year reverse mortgage. Did Fiona do the right thing, considering that women of her age live 14 more years on average?A~ Yes, because she can live rent-free for 10 years and receives a larger income for those years.B~ Yes, because she gets value out of the house in a form she can use.C~ No, because she may be unable to live in the house that long or if she lives longer, she will be broke.D~ No, because reverse mortgages only make sense for people under 50 years old.

Accepted Solution

A:
Answer:A~ Yes, because she can live rent-free for 10 years and receives a larger income for those years.Step-by-step explanation:Reverse mortgage loans allow homeowners to convert their home equity into cash income with no monthly mortgage payments.It is a type of loan for seniors age 62 and older. So, given is Fiona is 70 years, this age condition is checked.Fiona opts for the $32,000-a-year reverse mortgage for 10 years. Also given that women of her age live 14 more years on average.So, yes she did the right thing. She can live rent-free for 10 years and receives a larger income for those years.If she lives beyond 10 years, she must have saved enough by that time.