Reverse Mortgages

People may consider a reverse mortgage as a source of Retirement Planning and Funding especially when they plan on staying in their home. This strategy may work for some. Before exploring this, you should review this list below and then contact us to see what you should do based on your personal circumstances.

Potential Advantages	Potential Disadvantages
Use existing equity in home as collateral	Appraisals and legal costs may apply
Loan value never exceeds fair market value of home	Heavy exit penalties for opting out early
No loan repayments until home is sold	Generally interest rates higher than convential mortgages (usually 1.5% higher than standard 5 year)
You retain control of home until sale or death	Home-owners still responsible for property taxes, repairs, etc
You may receive either a lump sum or regular payments	If you don't meet the loan obligations, the mortgage could default, with immediate repayment required
You can pay all or part of the accrued interest once a year	Semi-annual compounded debt grows exponentially and could quickly erode all home equity
Proceeds do not add to taxable income or affect Old Age Security (OAS) or Guaranteed Income Supplement (GIS)

There are other options which should be explored including: accessing a line of credit, borrowing funds and only paying interest on the borrowed funds as needed, downsizing to a smaller home to access the equity or restructuring investment portfolios to generate a higher after-tax income to reduce or eliminate borrowing.

Please contact us for a consultation specific to your personal circumstances.