Is a Reverse Mortgage Right For You

If you are like most Canadians you are probably not familiar with Reverse Mortgages, let alone the possible benefits. Reverse Mortgages have been available in Canada for years, but have not been a popular solution due to the higher interest rates associated with this product and the fear of losing the equity in your home. I am going to attempt to explain how this might be a product that could help you or someone you know enjoy their retirement.

First, let’s talk about what made this product less than attractive in the past. Quite simply it was the interest rate. In the past you could expect to be paying 8-10% in interest. Over time this would definitely add up and significantly erode your equity in the home. The Canadian Home Income Plan became a chartered bank earlier this year giving them access to much cheaper funds. This results in you getting a rate that is currently around 4%. This now becomes a much more attractive solution.

What is a Reverse Mortgage

A reverse mortgage gives you access to the equity in your home without the need for making monthly payments like a conventional mortgage. If you are over 60 years old you can borrow up to 40% of the value of your home and you do not need to make a single mortgage payment as long as you or your spouse live in the home.

How does a Reverse Mortgage Work?

It is quite simple. The Canadian Home Income Plan lends you up to 40% of your home’s value. This money can be used for whatever you need it for…..vacations…living expenses….etc. The funds are tax free and does not affect your old age pension or guaranteed income supplement. You can take the money in a lump sum or set up a planned advances for a set period of time. Since you are not making payments the interest keeps accruing to the mortgage and will not be paid until you sell the house or your estate can remortgage the property if they wish to keep it.

Is a Reverse Mortgage Right For Me?

It could be. As more retirees are carrying larger amounts of debt in to retirement they are finding their fixed incomes are being stretched and they are not leading the retirement they dreamed of. A Reverse Mortgage is a great way to consolidate debt and your current mortgage and not have to worry about making monthly payments. This will allow you to free up your cash flow to spend on living your dream retirement.

If you would like to learn more about Reverse Mortgages or any other mortgage solutions please feel free to contact me.

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