Reverse mortgages have never enjoyed high recommendation rates among financial planners. But this is because reverse mortgages are generally taken out by regular people like you who may have had some unforeseen hardship, or several, keep them from planning the retirement of their dreams.
This article from the Globe and Mail takes an excellent and impartial look at the world of reverse mortgages, and while they may come up wanting as part of a long-term financial plan, as a short-term financial solution to the problem of what to do for retirement, they are a clear winner.
Life Throws You Curve Balls
Whether it’s an unforeseen medical leave or an unexpected job loss for a period of time, life very often doesn’t allow us to achieve our financial goals exactly according to plan. That’s where reverse mortgages come in. They help you to maintain a standard of living that you are used to at an interest rate that CHIP keeps as low as possible while considering the risks that they are underwriting.
Facts and Figures
The article broke down some really helpful facts and figures about reverse mortgages:
Setup costs: around $2500 for closing costs, legal fees and appraisals
Interest rates: (note, current as of time of writing, may change) 4.75% for variable rate, 5.95% for five-year fixed
Average applicant age: 72
Average time people stay in their homes after taking out loans: 12 years
What these figures tell us is that reverse mortgages are generally taken out by retirees who are already part of the way through their retirement who just want to ease financial pressures and get some extra cash, and they are doing it at fair and equitable interest rates that they do not need to pay until they sell the home.
The “Spending the Inheritance” Argument
If you have adult children, chances are good that they are self-sustaining and doing quite well on their own. One of the charges lobbed against a reverse mortgage is that there will be nothing left for the children. If you think that this may be a concern in your family, simply talk to your kids before you get a reverse mortgage.
Chances are you’ll hear sentiments like “I’m fine, Dad. You go ahead and enjoy your retirement and don’t worry about me.” If this is really a concern for your kids, they’ll tell you. Not to mention that most of our CHIP Home Income plan participants can only borrow up to 50% of their home value. Since home values rise rather than decline in most areas, the danger that there will be nothing left at all is minimal.
Special Holiday Offer for Reverse Mortgages
For a limited time, the CHIP Home Income plan is waiving closing costs. If you apply by December 5 and close by December 31, HomEquity Bank will waive the closing costs for everyone who applies for a three or five year interest rate term. Contact Horizon Equity today to apply or to find out more about the process.