CASH IN ON YOUR HOME EQUITY

Is a reverse mortgage for you?

IT’S A TYPICAL SCENARIO: you worry you’ll be carrying big debt into your senior years or outlive your savings. On the other hand, many of us are living in a home that’s paid off. A reverse mortgage means no monthly mortgage payments and no repayment until you sell your home or pass away. Although reverse mortgages have been offered in Canada for 30 years, there are still a lot of myths about them. Truth is a reverse mortgage may not be for everyone, but it may be for you.

MYTH I’ve been saving for retirement, so I’m set

Surveys show that even though most Canadians believe they have enough saved enough to last the rest of their lives, less than a third actually have more than $100,000 to draw from. Given increasing life expectancies and rising health-care costs, your savings may not last.

MYTH The interest rates are unfair

Interest rates are higher than on conventional mortgages but not unreasonable and are lower than other forms of debt like credit cards and private mortgages. The money is not repaid until the house is sold, and that may not be for decades.

MYTH A reverse mortgage only makes sense as a last resort

Depending on your financial situation, a reverse mortgage may be ideal for you. It could allow you to clear credit card debt or avoid the costs associated with moving – realtor fees, home staging, movers for instance.

The cash provided by a reverse mortgage is tax-free, lower risk and long term. It can help you stay in your home in your retirement and conserve your savings.

MYTH A reverse mortgage comes with expensive fees

Administrative costs of title searches, document preparation and legal services are fixed and don’t usually exceed $1,500. A home appraisal costs about $400, and independent legal advice $300 to $600.

MYTH I’ll lose my home

You keep the title to your house, and you aren’t ever forced to sell. Your obligations are maintenance, property tax and insurance payments.