Reverse mortgages have become increasingly popular in Canada as a tool for seniors to unlock equity in their homes. Homeowners can unlock up to 40% of the equity in a home and turn it into cash.
It’s true that reverse mortgages can be more expensive than other solutions, but there are a number of advantages that reverse mortgages offer. First, homeowners can be sure that they will never lose their home with a reverse mortgage. Since Canadian lenders are so careful with their underwriting policies, they can make applicants a promise that they will not lose their home. Second, by taking out a reverse mortgage rather than a home equity line of credit, you can eliminate the need to make monthly interest and principal payments which frees up additional valuable cash flow. Third, any funds you receive will not be added to your taxable income, so it doesn’t affect Old Age Security (OAS), or Guaranteed Income Supplement (GIS) benefits you might receive.
While there are many compelling advantages to taking out a reverse mortgage, there are a few points to consider which some applicants may consider to be negative. First, the interest rates are typically slightly higher than other solutions, like home equity lines of credit. Second, many home owners have a difficult time coming to terms with the fact that the equity in their home that they’ve built over years will erode and the entire estate may not be passed on to their children. However, reverse mortgage lenders in Canada can typically work with home owners to come up with a solution that works for all parties.