Who says you have to leave your home when you retire?
As a Canadian homeowner, you’ve earned the right to enjoy what you’ve invested in. Find a mortgage broker who can help you discover how you can realize your home’s true value.
When you’re able to access up to 55%* of the value of your home in tax-free cash, you can retire exactly the way you’d like.
Your home isn’t just a home to you – it’s home to your family.
A home to memories and the future. A future you should look forward to when you retire.
When you’ve spent your life in your home, you shouldn’t have to move. You should have the freedom to enjoy the retirement you deserve.
With the right reverse mortgage product you choose for yourself, your retirement can be right at home.
48 HOURS FUNDING IS JUST A CLICK AWAY.
WHAT IS A REVERSE MORTGAGE?
Many people are confused as to what are the benefits and disadvantages of a reverse mortgage. Many of them have no idea that such a financial instrument exists, let alone how it works. But the truth is that it is a wise financial decision especially if you foresee yourself living in your house for a long time to come. There are various benefits of such a financial option. In addition to this, there are also some disadvantages which need to be weighed carefully so that you can make the right decision.
One benefit is that reverse mortgages do not require a large down payment. This is not surprising since they are basically a loan based on the equity accumulated in your home. A reverse mortgage also provides homeowners with a tax break. The reason is that a reverse mortgage allows you to deduct a certain amount of interest from the proceeds of your loan. While these loans are generally tax-free.
Another benefit of a reverse mortgage is that they give you flexibility. This is because it’s not a home improvement loan and you can use the fund for any purpose you wish. Another advantage is that you are borrowing against the equity in your home that is usually increasing year-to-year. The only limit is the amount you can borrow, and there are usually no penalties involved. Also, you will never borrow more than the available equity in your home, so you be exposed to the risk of losing your home.
One disadvantage of a reverse mortgage is, just like any other mortgage loan, you are expected to continue paying the property taxes, home insurance, and other costs for the property upkeep.
Reverse mortgages can benefit those who are 55 years old and above. They provide seniors with extra money each month, and they do not have to worry about paying back any mortgage loan. However, borrowers should take a number of things into consideration before applying for a reverse mortgage. They should do their research, weigh the pros and cons of their reverse mortgage loan, and make sure that they can afford the payments every month. They should also check with their accountant to see if there are any penalties or restrictions that could affect their wealth management plan.
WHAT ARE THE PROS AND CONS OF REVERSE MORTGAGES?
If you think a reverse mortgage is a good idea now, talk with a mortgage broker A reverse mortgage can be a good idea only if have at least 35% equity in the house. In the reverse mortgage scenario, the lender is NOT the one who owns your home and you will continue to be the owner of your home. The good thing about this scenario is that you have access to funds from the equity in your home without having to qualify for a conventional mortgage loan that assesses based on the borrower’s annual income to determine affordability.
The problem is that most people who take a reverse mortgage do not make the next step to build generational wealth. Some may borrow more money and use it straight to fund their retirement lifestyle. They are better off investing the fund into an income-generating property that in turn fund their retirement lifestyle.
Regardless of your reasons for taking out a reverse mortgage, it is a bad idea if you do not reinvest the equity into at least one income-generating property. When comparing reverse mortgage loans from different lenders, look for their lending requirements and payout options to make sure they fit your lifestyle and long-term plan.
Another thing to consider when thinking about a reverse mortgage is that your heirs must buy the property if they would like to keep the house as an heirloom. The reason is that your house is up for sale in the event of your death and that is when your estate can buy the property from the bank. Usually, the banks will work with the estate to figure out a smooth transition.
With reverse mortgages, borrowers will never borrow more than they can afford because the banks have special provisions that allow a maximum of 65% of the property value to be distributed as a mortgage. If you have more equity over time due to market appreciation, you can re-qualify for more loans with the reverse mortgage.
Because there are both pros and cons associated with reverse mortgages, it is important to understand both sides before making a decision. With the proper information, you can determine if a reverse mortgage is right for you.
JERMAINE HINDS, MORTGAGE BROKER
Jermaine Hinds is a licensed mortgage broker for mortgages across Canada.
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