Taking Another Look At Reverse Mortgages

The fact is that for 20% or more of people over the age of 55, it is the best solution there is. You need facts from someone that is not biased and that has the ability to give you all your options. There are some very compelling benefits, especially today with the reality we are now dealing with. 

 

1.  Purchases of principal residence – for right-sizing/relocating and requires additional funds

2.  Helping family – providing funds to your family for down payments and no worries about payments

3.  Purchase of 2nd property – utilizing equity from your primary residence to put towards a vacation / rental      property

4.  Eliminating debt – and stop stressing and struggling with cash flow that is ruining your retirement

5.  Home renovations – renovating to remain in the home or simply updating it rather than selling

6.  More Income – additional income (Tax Free) to cover expenses and enhance lifestyle

Many clients have reported back to say that it was the best thing they every did, despite the initial concerns they had before checking out the facts. However, we spent the time weighing all their options, had discussions with family, when applicable, and took a measured approach to ensure that it was right for them. This is key! Clients in their 50s now build this strategy into their long term plans, especially those heading into retirement with a mortgage.

Below is a list of the most commonly asked questions:

• Question: Will the bank own the home?

   Fact: The homeowner always maintains title ownership and control of their home, 

The Lender simply has a first mortgage on the title

 

• Question: Can the bank force the homeowner to sell or foreclose at any time? 

Fact: A reverse mortgage is a lifetime product and as long as the property taxes and insurance are in good standing, the property remains in good condition, and the homeowner is living in the home, the loan won’t be called even if the house decreases in value. 

• Question: With a reverse mortgage will the homeowner owe more than their house is worth? 

Fact: Clients can qualify for up to 55% of their home’s appraised value and every reverse mortgage comes with a *No Negative Equity Guarantee which means that the overall debt will not exceed the cost of the loan as long as the conditions of the loan are met. In fact, 99% of clients have equity remaining in the home after the loan is repaid. 

•  Question: Are reverse mortgages too expensive because the rates are high? 

Fact: Interest rates can be more favourable than alternative lenders' rates on second mortgages or unsecured loans. Plus, with a reverse mortgage, clients don’t have to worry about making any repayments as the debt isn’t owed until the borrower(s) pass away or no longer live in the home. 

*The guarantee excludes administrative expenses and interest that has accumulated after the due date. 

• Question: Isn’t a reverse mortgage a last resort solution? 

Fact: A reverse mortgage frees up equity that is tied up in the value of a home and can allow the borrowers to enjoy their retirement on their terms. In fact, many financial professionals recommend a reverse mortgage as the proceeds are tax-free and after paying off debts, can be used for anything the client chooses, from purchasing a vacation home to helping grandchildren with school tuition. 

• Question: Can the homeowner(s) still get a reverse mortgage if they have an existing mortgage? 

Fact: A reverse mortgage can be used to consolidate existing debt, eliminate monthly debt payments and provide financial security. If a client has existing debt, these would need to be paid off first and the remainder of the funds can be used however the client chooses. 

• Question: Isn’t a Home Equity Line of Credit (HELOC) a better option? 

Fact: Clients should always explore all their options before making a decision. An independent Mortgage Broker is able to give you unbiased information to help you make the best decision for your personal situation. HELOCs are a good short-term borrowing option for people who can pay the interest and loan back in the near future. Whereas a reverse mortgage is a long-term financial solution that doesn’t require any monthly payments and provides the ability to prolong retirement savings. 

• Question: Aren’t surviving spouses stuck with paying the loan after the homeowner passes away? 

Fact: As long as the surviving spouse is on title, they can choose to remain in the home without having to make a repayment. 

For more information, please contact me or book a consultation. By reviewing your current situation in-depth, weighting the pros, cons, and risks of HELOC, Mortgages and other options in retirement, you can make an informed decision. 

In your best interest, 

Winona