Looking to get a reverse mortgage? A reverse mortgage calculator may have shown you nice financial benefits; indeed its one of a valuable retirement planning tool that can show you a great increase in your retirement income against your asset being as a homeowner, but you have to carefully compare the benefits against all the reverse mortgage downsides in relation to your personal financial situation.
What is a reverse mortgage in Canada?
“A reverse mortgage Canada is a secured loan that is designed for senior homeowners aged 55 years, and older. A reverse mortgage is secured by the equity in the home, which is the difference between the value of your home and the unpaid balance of any current mortgage. It allows homeowners to obtain cash without having to sell their homes. Homeowners may be able to borrow up to 55% of the current value of their home. The agreement is a “life-term” loan, which is a loan for either the lifetime of the owners or the life of the ownership of the home“.
Reverse mortgages have got very attractive and convincing claims that are being used by marketing campaigns like; enjoy your financial freedom, borrow tax-free, obtain the money now, remain independent, and renovate your house while staying in your home, where your home will continue to appreciate in value. Never make your decision to get your reverse mortgage loan before exploring your other suitable options; shop around, compare the costs and study their impact on your life. Moreover, don’t forget to ask questions to your lender about reverse mortgages in light of your own personal financial position and other doubts you may have prior to taking the loan. The government of Canada has already written down the important questions that you should ask your lender that would help you in making the decision, the link to the page is provided at the bottom.
Before you make your decision to get a reverse mortgage, make sure you consider the advantages and disadvantages carefully; the following are some of the pros and cons of reverse mortgage Canada:
- You don’t have to make any regular loan payments
- You may turn some of the value of your home into cash, without having to sell it
- The money you borrow is a tax-free source of income
- This income does not affect the Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting
- You still own your home
- You can decide how to get the funds
- Interest rates are higher than most other types of mortgages
- The equity you hold in your home may go down as the interest on your loan adds up throughout the years
- Your estate will have to repay the loan and interest in full within a set period of time when you die
- The time needed to settle an estate can often be longer than the time allowed to repay a reverse mortgage
- There may be less money in your estate to leave to your children or other beneficiaries
- Costs associated with a reverse mortgage are usually quite high compared to a regular mortgage
To get more in-depth and up-to-date knowledge of the subject you should consult the Government of Canada website; get all the information about reverse mortgages in Canada.