Are reverse mortgages really a good idea?
Television ads make reverse mortgages seem like a good solution for seniors [55 years and older] who are property rich and cash strapped, but are they?
“An example from one of the few Canadian sellers of this product demonstrates how much it can add up. If you take out a reverse mortgage for $150,000, accumulated interest and closing fees will bring the total you owe to $206,734 by the end of a five-year term.” [taken from the Advocate, Winter edition 2019, BC Forum]
It doesn’t end there, as there may be appraisal and application fees when you take out the mortgage.
Basically, unless you are going to win a large lottery or have a rich relative who is older than you, and will leave you a small fortune, the only way out of this arrangement is to sell your home or die.
And there’s a further penalty if you do either – within three years.
We all need to look twice about a financial arrangement where the interest exceeds what you actually borrowed.
Talk with your financial advisor as they have other options to consider such as downsizing, renting a room or a suite to a tenant, taking out a home equity loan with lower interest (and affordable payments), or a loan equity line of credit available from most financial institutions.
Remember the old adage, “if it sounds too good to be true, it probably is.”
Marie R. Robson, Maple Ridge
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