By Pam Pikkert
Red Deer Express
The best part of writing about mortgages is that I get the chance to educate people about a topic which I find endlessly interesting. Reverse mortgages are certainly a topic which deserves some consideration. Everyone seems to be quite polarized over this issue so it seems it is past time we took a closer look.
Imagine the following scenarios:
1. Bob receives a CPP and OAS and a small work pension. His fridge has died but all of Bob’s credit facilities are maxed and he has been declined for additional credit.
2. Sue needs to put her husband Joe into long term care but the cost is much higher than they anticipated and she knows their savings will not last long.
3. Mary and Bill want to purchase a property in Arizona so they can enjoy the warmer weather.
4. Steve wants to be able to use the equity in his home to purchase a rental property so he has additional cash flow.
5. Eveline recently saw an increase in her living expenses and cannot make the ends meet.
6. Cyrill and his wife would like to gift the inheritance to the kids while they are able to watch them enjoy it.
So you get the idea. There are many situations that a person may benefit from having a reverse mortgage. The extra funds could help them through a tough spot or allow the freedom extra funds can offer.
Here in a nutshell are the facts.
• There is only one provider of reverse mortgages in Canada and they are regulated by the Federal government like any other bank.
• They have been around for 30 years.
• You remain the owner of the home, not the bank.
• Unlike a regular mortgage, you do not need to qualify based on income.
• The goal is equity preservation. They want you to have the same equity in your home at the end as you do now.
• No payments are required as long as you still live in the home though you can if you like.
• The rates are not horrible and the only fees you pay are $1,495 for the closing costs, an appraisal and the fee for independent legal advice.
• The amount you can borrow is based on your age, location, property type and the value of the home.
• The money can be taken as a lump sum or month by month, whichever suits you better and it can be used for whatever you like though there is due diligence to protect you.
• If you are survived by your spouse they can remain in the home payment free.
• Tax arrears, OPD, bankruptcies can all be paid from the proceeds.
• Your family is welcome to ask their questions to protect your interests and the mortgage company knows that you want to have something to leave the kids, they will help you achieve that goal.
As always you should speak with a qualified mortgage professional. My hope is that you may have seen that a reverse mortgage is not an evil entity designed to take your home but instead should be viewed as just another tool available to you.
Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.