In this article we thought we would outline the real pros and cons of a reverse mortgage.
Like any financial decision, there are both advantages and disadvantages that need to be considered.
As the leading specialists in Canada, we believe in objectively showing you both the advantages and the disadvantages of a reverse mortgage – so you can rest assured that the decision is absolutely the best one for you.
You want to make your decision while being informed and educated about all the facts.
So in this latest article, we’d like to take a look at both the major pros and the cons of a reverse mortgage in Canada.
But What Exactly Is A CHIP Reverse Mortgage?
If this is your first time reading about this kind of mortgage, I strongly suggest you
click here to learn more if you have not already downloaded our free guidebook – in that you’ll learn everything you need to know about reverse mortgages in Canada.
1. You Own Your Home For Life. Period. No Exceptions.
By far the biggest advantage of this mortgage product is that it allows you to get money out of your home with absolutely zero risk that you’ll ever lose ownership of your home.
This product – unlike what some people believe – is designed to keep you in your home for life.
2. Freedom And Flexibility
3. 100% Tax Free
4. No Re-Payments Required
The whole purpose of this loan is financial freedom – not loading you with more debts that you need to worry about paying!
5. Safety If The Housing Market Declines
Even if there was a massive housing crash, you will never owe more than what your house is worth at sale – guaranteed. Even when things such as Brexit occur, we are there to help you.
And, best of all, 99% of reverse mortgages in Canada have equity remaining when the mortgage is removed. The other 1% is capped to what the home is worth – it can never be above this.
DISADVANTAGES OF A REVERSE MORTGAGE:
1. Interest Rates
The amount you receive is still liable to interest. Although you will never have to make any re-payments, this could reduce the equity in your home over time – but only if interest rates are more than double your property value appreciation.
Interest rates are almost always higher than a ‘normal’ mortgage or Home Equity Line Of Credit (HELOC) but lower than a Line Of Credit (unsecured), Car Loan, Loan or Credit Card rate by quite a bit.
2. Moving Home Is Harder
The whole purpose of this product is to help you stay in your home.
3. You Might Not Be Eligible
While you do not need good income or an excellent credit score – which you would need for most mortgage products, there are some restrictions on eligibility.
All property owners listed on title must be over 55 and your age(s) will determine how much money you are eligible for – in general, the closer you are to 55 the less you are eligible for.
4. Reduction Of Your Estate Size For Inheritance
Of course one of the disadvantages of a reverse mortgage (depending on your outlook) is that you are reducing the estate size available to your relatives for inheritance. For this reason, you might consider speaking to any relatives or family members during the process of applying to ensure they are happy with everything.
The other thing to note is that you are only reducing your estate size if you actually use the all the money.
I hope the article above helps you decide if this is a great fit for you.
Sometimes you will have heard other rumours or ‘facts’ about the disadvantages of a reverse mortgage in Canada – mainly this is people confusing them with the American version of the product.
If you want more information, feel free to leave a comment below.
The above information represents the real and true pros and cons of a reverse mortgage – if you have any other questions or concerns then feel free to leave a comment below and we’ll respond in due course.