A reverse mortgage is not a blanket solution for every Canadian homeowner age 55+. It is a great tool but there are other options to explore depending on your lifestyle and your goals.
Do NOT take a reverse mortgage if you:
Require funds for less than 1 year – if you are in need of short term financing, a reverse mortgage may not be the best solution. For example, let’s say that you want to make some home improvements before selling this year. In this case, we may look at home equity line of credit or another type of “open” term product. Open simply means that you can payoff the loan without penalty.
Have adequate savings and investments – if you started your retirement planning early in life, you may have accumulated the savings required to comfortably afford your lifestyle for the foreseeable future. If this is you, there is no need for a reverse mortgage.
Want to downsize your home – if your preference is to downsize and use the equity from the sale of your existing home to fund the rest of your retirement, then a reverse mortgage may not be right for you.
Are facing a large mortgage penalty – if you currently hold a regular mortgage through a bank or credit union, it’s possible that paying out the mortgage prematurely with a reverse mortgage could trigger a large penalty. Sometimes it’s better to wait until the mortgage term expires.
These are the top 4 reasons why you should not apply for a reverse mortgage. If any of these apply to you, speak to one of our licensed mortgage advisors to see if there are better solutions to help with your current situation.