As Covid 19 ravages our economy and stock market investments, incomes have dropped. Some may be facing the need to sell or to leverage the value in their house and borrow from a bank to cover expenses. Reverse mortgages are being advertised widely and I thought it prudent to reprint my article from October 2019. A reverse mortgage may put you in the position where you don’t have the funds you need for the care home of your choice later in life or greatly diminished funds for your beneficiaries.
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 from 4.24% to 4.99% compared to 2.24% (Dominion Lending rate) for a fixed 5-year mortgage.
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 up to half the value of your house to a bank when you may 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 an article written by Robert McLister which was published in the Globe and Mail on September 13th, 2018. I recommend you read it, although the numbers are no longer accurate the article analyzes reverse mortgages and HELOCs well. Or call me for a conversation on this topic. Please, think carefully before committing yourself to a reverse mortgage. Here is a shortened URL to the article https://rem.ax/2B3sQvt