With the rising cost of living and ever-increasing financial responsibilities, saving for retirement may seem like an elusive dream. Many people consider reverse mortgages in Vancouver a practical option for saving for retirement. However, Vancouver reverse mortgages have their pros and cons. At AHA, we help our clients understand the advantages and disadvantages of reverse mortgages to determine if it is the best option for them.
Advantages of a Reverse Mortgage
A House to Live In
A reverse mortgage plan guarantees a roof over your head. You can clear your older mortgage plan while still living in your house.
Reduced Risks
Reverse mortgages do not come with default penalties. Therefore, homeowners do not face the risk of eviction. The property owner only pays for the cost of keeping the home, including maintenance, taxes, and insurance. In addition, debtors cannot access the homeowner’s income or assets because of defaulted payments.
Zero Taxes
The amount borrowed on a reverse mortgage is tax-free. Payments are made as a lump sum or in monthly installments. Zero tax on payments frees up more money to spend on personal projects or financing loan fees.
Income Boost
A reverse mortgage loan is a direct boost on retirement income. It suits seniors living in their homes with no one to support them financially. Surplus income paid by lenders can be passed down to their families as inheritance, especially if the property has high equity.
Disadvantages of Reverse Loan Mortgages
High Fees
Some of the fees included in reverse mortgages, including closing, origination, and insurance fees can be quite high. In addition, the mortgage holder may have to pay interest accrued throughout the loan period. Fortunately, the accumulated interest seldom exceeds the home's value.
Untapped Income
Reverse mortgages deny owners of high equity homes potential income, especially if the loan offered is lower than the property value. For example, if the current loan limit is approximately $700,000, a home with a $900,000 market value misses the extra $200,000.
Reduced Equity
Accumulating interest can reduce the value of your home. A reverse mortgage loan is considered monthly income by the State. Mortgage holders may not qualify for other government benefits if they are already cashing reverse mortgage checks. Find out if your reverse mortgage plan will affect other state benefits, including Medicare.
How Does A Reverse Mortgage Loan Work?
A reverse mortgage or equity release fund allows you to borrow from a lender, an amount equal to your current home value. The amount that may be granted on a reverse mortgage is determined by:
- The age of the property owner
- Home appraisal value
- Financial institution one is borrowing from
Unlike conventional loans home loans, a reverse mortgage loan does not require monthly payments. You only pay an accrued sum at the end of the loan agreement, when vacating the house, or when selling your home.
Reserve mortgages can be a lifesaver, especially if you are in a bad financial situation. Be sure to apply for a reverse mortgage limit that matches your home equity. In addition, find out the hidden costs of a reverse mortgage to protect your home equity.
At AHA Mortgages, we strive to provide our clients with favorable terms on their reverse mortgages. Contact Adkins Healey & Associates at 604.617.4200 to build a brighter future.
