CANADIANS LOVE THEIR HOMES.
So the financial world has come up with the reverse mortgage to allow people to draw out some of the value of their homes while continuing to live in them. But can you really eat your cake and have it, too?
Once you (and your spouse) turn 55, you may borrow against the value of your home, in some cases, as much as half of its value. You can usually receive a lump sum and/or an income stream. You don't have to repay the loan (mortgage) until the home is sold. The interest on the debt compounds until that sale.
Mortgage specialists report that with the increasing number of seniors in the population and today's low interest rates more people are applying for reverse mortgages to boost their retirement income or simply to spend some of the equity they have built up in their homes.
While a reverse mortgage can make sense in certain situations (especially if there are no heirs), consider alternative sources first.
Could you perhaps sell an interest in the house?
You could also take out a short-term loan or set up a line of credit secured by the equity in the home until you do sell. Compare the costs and benefits of these approaches with those of the reverse mortgage.
When you apply for a reverse mortgage in most cases you will be required to seek (and pay for) independent advice to ensure this is the best route to follow, personally and financially.
Mike Grenby is a columnist and independent personal financial adviser; he'll answer questions in this column as space allows but cannot reply personally. Email: [email protected].
