Reverse Your Thinking On Reverse Mortgages

If there is a financial product out there that people seem to love to hate, it’s a reverse mortgage. But is that fair? Here are a few facts that might change your perspective and “reverse” some of the misconceptions out there. Pattie Lovett-Reid, Chief Financial Commentator for CTV recently changed her opinion on Reverse Mortgages and while she was previously opposed to them, she now sees them as a viable and valuable tool in your retirement toolbox.

Reverse mortgages are loans that allow you to access some of your home’s equity without making a payment or forcing you to sell. However, a reverse mortgage loan ultimately does have to be repaid either when you move out of the home or when you die. There are some extenuating circumstances when the loan may need to be paid back sooner. For example, if the home is no longer your principal residence, you fail to pay your property taxes or homeowners insurance, or do not keep the home in good repair.

Why is this product so feared? Many people think that the reverse mortgage lender would take ownership of the home, or they have concerns about equity erosion, the false belief that borrowers may owe more than the house is worth, and the inaccurate fear that if one spouse dies, the other will have to move out, are among the top reasons their customers avoid reverse mortgages. These are all fears and incorrect myths that when reviewed with a reverse mortgage specialist like me can be explained with proper context such that the fears erode away.

A reverse mortgage might be a bad idea for someone who has a lot of debt and struggling with financial obligations. It may make more sense to sell in this case. Additionally this product is also not a good idea for those looking for a short-term solution, as there are pre-payment penalties, or someone who is able to get conventional mortgage or a home equity line of credit (HELOC) at a lower rate.

The reverse mortgage allows the home owner to stay in place longer, and push off a move to a retirement home longer than without this product. It is also a great product for parents and grand parents wanting to pass on an early inheritance to help their future generations get into the real estate market without having to have the parents sell their home.