The reverse mortgage. It sounds perfect based on what the dazzling commercials and flawless brochures tell you:
You can keep your home. Tap into money for your retirement. Make your Golden Years your best years ever.
But before you sign up, it’s important to know what you’re actually getting into. While it’s true that a reverse mortgage will let you tap into your home’s equity and use that as additional income, there are some vital points that reverse mortgage companies aren’t telling you.
You’ll Pay a Higher Rate with the New Mortgage Set by the Reverse Mortgage Lender
One of the big so-called selling points of a reverse mortgage is that you can use the money you get from the equity in your home to pay off your existing mortgage or any other bills, like medical bills or credit card debt.
But what mortgage lenders fail to tell you is that your new reverse mortgage is in first position. This means it’s the first debt that has to be paid when you die, which can be a challenge to whoever is managing your estate.
And, unlike your original mortgage, this debt has a higher interest rate. This is because, in most cases, reverse mortgage lenders are not necessarily in the mortgage business. Their major concern for becoming a reverse mortgage lender is to make as much money as they can from the assets they own.
And speaking of the assets they own,
The Reverse Mortgage Lender Owns Your Home When You Die
Yes, you can still live in your home if you get a reverse mortgage. But upon your death, it becomes the property of the reverse mortgage lender. This can come as a complete shock to your children or other family members, as your home would not pass to them as an inheritance.
You Won’t Be Able to Borrow Again
If you’re on a fixed income, you know that money can often be tight, no matter how much you try to save and budget. Traditionally, you could have tapped into the equity of your home, but since this equity is now in the hands of the reverse mortgage lender, you won’t be able to borrow against it again. Like ownership of the property, this often comes as a complete shock to seniors looking to make well-informed financial decisions.
An Alternative to Reverse Mortgages that Makes Better Financial Sense
So is there an option for seniors on a fixed income to save money without sacrificing their health and happiness? There is, and you don’t need a reverse mortgage to reach your financial goals.
Here’s what you do:
Borrow a home equity loan from Cannect
Instead of getting roped into a reverse mortgage, set up a CannectFlex loan. This way, you can make the interest payable at the maturity of the loan and set your repayment date to match your existing first mortgage renewal date. You can then work with Cannect to find a new first mortgage at a better rate, saving money now and in the future, because a CannectFlex loan allows you to pay everything out without being forced to break your first mortgage, pay higher rates, or have your home “held hostage” by a reverse mortgage company.
For more details call 416.766.2666 to speak with one of our home financing specialists who will take the time to answer all of your questions and provide you with the information you need to make a confident, well-informed decision for your financial future.