Debunking the Myths of Reverse Mortgages

Reverse mortgages have evolved over the years and become a product that many people are incorporating into their financial retirement plan.  But there are still many people who do not understand what a reverse mortgage is and have a negative view of them which may stem from what has been heard about reverse mortgages in the US over the last 2 decades.  Because of Canada’s lending regulations, Canadians are protected by very strict rules and regulations covering reverse mortgages.  We will admit that this may not be the right type of mortgage for all clients, however there are many that can benefit from it. 

With Baby Boomers moving into retirement and the current cost of living, a reverse mortgage can offer an opportunity for more people to remain in their homes without cash flow issues.  Please contact us to review if this is a viable solution for you.  We will review your full portfolio and see what would be the best solution for your specific situation, just like we do with all of our clients.

Here are some of the most common reverse mortgage myths “debunked”.

Myth: The bank will own my home.
Fact: Ownership and control of the home always remains with the homeowner.   They maintain the power to decide when and if to move or sell. 

Myth: Reverse Mortgages are too expensive.
Fact:  The rates are modestly higher than regular mortgages because there are no payments required. Think of it as a traditional mortgage with all payments deferred.

Myth: The homeowner cannot get a reverse mortgage if they have an existing mortgage.
Fact:  Many people who choose to get a reverse mortgage use the proceeds to pay off their existing mortgage and other debts to free up their monthly cash flow for other things.  Reverse mortgages can also be used to purchase a home.  Up to 55% of the purchase price, depending on the borrower’s age, can be put into a reverse mortgage.

Myth:  The surviving spouse must pay the loan or sell right after the homeowner passes away.
Fact:  Surviving spouses can choose to remain in the home without having to make a payment unless they choose to sell.  The loan must be repaid once the homeowner and their spouse are no longer living in the home.

Myth:  A reverse mortgage is a last resort solution.
Fact:  Many financial professionals recommend a reverse mortgage because it offers clients the flexibility to stay in their home.  It can offer a client the access to equity that they have built up in their home while they are able to enjoy it.  They could do some traveling, renovations, spoil the grand kids or just the freedom from monthly debt payments.
 
I, Amy Coburn, am a licensed Mortgage Broker and a Certified Reverse Mortgage Specialist.  Please contact our office with any questions you may have.