A Reverse Mortgage – What Is It?

June 12, 2020


Have you heard of a “Reverse Mortgage”? Do you know what a “Reverse Mortgage” is? What it does? What it can do? Should you consider obtaining a “Reverse Mortgage”?   Will a “Reverse Mortgage” solve your financial problems?


A Reverse Mortgage allows a homeowner to obtain some of the equity out of their home without repaying the mortgage until the property is sold; in other words, there are no payments of principal nor interest due until the property is sold. This looks like a great invention —almost like finding a pot of gold. However, it is not all milk and honey!


While there are no payments due until the sale of the property closes, the interest rate charged is considerably higher than the then current mortgage rate offered by primary banks at any time. In other words, you either pay the “freight” now-or you pay it later.


Why would someone consider obtaining a Reverse Mortgage? Once you retire from work and your income drops you may want to remain in your home rather than moving to a smaller home or moving to a condominium unit, or a Retirement Home. If you come down with a major illness that requires costly medication, or requires you devote funds to  long-term medical assistance or to customizing your home to make it compatible with your medical needs, then the funds received from a Reverse Mortgage may be the answer! The funds obtained through a Reverse Mortgage can assist with all of these things!


The funds obtained from setting up a Reverse Mortgage can be useful in other scenarios, too. Let’s say your home needs major repairs, and you either want to continue living there or else fix it up before you list it for sale. Being retired with no income, you may not qualify  for a conventional mortgage (nor will you have the income to carry it).   The funds from a Reverse Mortgage can help with this. Or, you may wish to help your child start or expand their business, purchase a home, or help your grandchildren with the cost of going to college, a trade school, or university to further their education!


As mentioned, the Reverse Mortgage is only due on your sale of the home as the owner, or else it will be paid out by your Estate Trustee after you die. If you have a spouse, he or she can remain in the home as long as they wish without having to discharge the Reverse Mortgage until the earlier of the date they move out of the house, or the date they pass away.


Depending on your financial situation, a Reverse Mortgage is something you may wish to inquire about.  Do speak to your financial advisor and your family first. Then consult with your lawyer and your financial planner if you wish to further explore this option.



Article Courtesy of:

MARTIN RUMACK, Barrister and Solicitor.

2 St. Clair Avenue East, Suite 202

Toronto, ON, M4T 2T5

Ph: 416-961-3441 (ext 26)

Fx: 416-961-1045

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