Mortgage Calgary

Last week, Seniors Money International became just the second company in Canada to offer reverse mortgages. Canadian Home Income Plan Corp., or CHIP, has offered reverse mortgages for the last 20 years without competition. So what does all this mean for you?

Lets start out by looking at what exactly a reverse mortgage is by contrasting it to a normal mortgage. In a mortgage the homeowner makes a monthly payment to the mortgage lender. After each payment, the homeowner’s equity increases within his or her property. At the end of the term, the mortgage is paid in full and the property is released from the lender. In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, then the debt on the property increases each month.

A reverse mortgage is appealing to seniors because they can get money for their house without having to move. Let’s face it, selling your house and moving to a new one is a daunting task for anyone, espicially for older people.

In an interview with CBC, a CHIP official was quoted as saying, “The debt (from a reverse mortgage) will increase and it will double every seven to eight years. That’s a financial fact.” In addition to the compounding debt, there are initial costs of setting up the reverse mortgage, which is usually at least $1000.

So what are your alternatives if you want money but don’t want a reverse mortgage? Consider taking out a line of credit with the house as collatoral (called a reverse mortgage line of credit), or rent out a portion of your home. If you don’t mind moving, consider downsizing to a smaller home or simply rent an apartment.

Many experts say only consider a reverse mortgage as a last option. Critics of the financing option say it takes advantage of seniors who don’t want to leave their homes and often don’t fully understand what they are getting into. Regardless of your choice, be sure to educate yourself on all aspects of the reverse mortgage.

Is a reverse mortgage right for you? If you answer “no” to any of these, you may want to seek other options.
• Does owning a house benefit you more then living in an apartment would for now and in the future?
• Can you accept the fact that your debt from your reverse mortgage can double in less then seven years, thanks to compounding debt?
• Can you cover all home expenses, including taxes, and insurance? If not, the lender may be able to demand full mortgage
repayment!
• Do you know all of the options besides a reverse mortgage that are available to you? Do you know the market value of
your house right now?