As with a conventional mortgage, there are set-up costs with a reverse mortgage, which you should consider in your decision to use one. Equitable Bank’s Reverse Mortgage Eligibility Calculator is a good place to start. In less than a minute, it will give you an accurate estimate of how much funds you have available.
You don’t need income to qualify for a reverse mortgage, and you can choose from a variety of terms and a fixed or variable interest rate. (As of October 2020, Equitable Bank’s 5-year fixed rate lump sum reverse mortgage was 3.69%).
Who is a reverse mortgage for?
There are a few scenarios where a reverse mortgage can be a solid option. We’ll take a look:
Retirees who need extra income
Because the cost of living is high in many parts of the country, it is difficult for people to buy a house, pay for it, raise children and saving for retirement, says Annie Kvick, Certified Financial Planner with Money Coaches Canada in North Vancouver. This can leave many people strapped for cash in retirement, when they have fewer borrowing options because they are no longer receiving income.
A reverse mortgage is a tool retirees can use to pay for expenses like groceries, home repairs or medical care, notes Kvick. This is also an option for retirees who are covering their expenses, but want to give someone money now, rather than waiting to pass those funds on in their will.
However, Kvick notes, it’s important to have a plan for using reverse mortgage funds otherwise, she says, “you could spend too much in the first few years and then run out of money.”
Retirees who wish to stay in the family home
Many people prefer to stay in their family home when they retire, and for good reason. “You’ve created a community, you have friends there, it can be close to stores and hospitals, and it’s expensive to sell and buy as well. [another] at home, ”Kvick says.
A reverse mortgage can help you stay in your current residence, whether you need the loan money to pay for daily expenses, property maintenance, or renovations to make your home more accessible in terms of mobility.