There is alot of advertising currently on the benefits of reverse mortgages. But are they a sound financial option? Reverse mortgages allow you to borrow money on the equity you have in your home. You don’t have to make any payments till you move out. You can never be evicted from your house. But they accrue interest at 6.59% compared to 2.59% (Dominion Lending rate) for a conventional 5-year mortgage. At that rate, (6.59%) the loan will double every 11 years according to an article in the Globe and Mail by Robert McLister published on September 13th, 2018. I recommend you read it.
Yes, I am paid when I sell houses but, if you are considering a reverse mortgage, please ask yourself this question: Why would you give 55% of the value of your house to a bank when you will likely need that money later to pay for long term care in a home of your choice rather than resorting to whatever the government will provide? That’s just not a pretty picture. Downsizing is an option that will keep all of your money in your hands and give you the cash you need to live comfortably now and in the future.
If you are determined to stay in your house and need cash, look into the Home Equity Line of Credit (HELOC) offered by Manulife. It is described in detail in the above-mentioned article or call me to discuss this option. Please, think carefully before committing yourself to a reverse mortgage.
Click on the link to read Robert McLister’s article.