As with a conventional mortgage, there are setup fees with a reverse mortgage, which you should factor into your decision about whether to use one. The Equitable Bank Reverse Mortgage Eligibility Calculator is a good place to start. In less than a minute, it will give you an accurate estimate of the amount of funds available to you.
You don’t need income to qualify for a reverse mortgage, and you can choose from a variety of terms, and a fixed or variable interest rate. (As of October 2020, Equitable Bank’s 5-year, fixed rate, lump-sum reverse mortgage was posted at 3.69%).
Who is a reverse mortgage for?
There are a few scenarios where a reverse mortgage can be a solid option. Let’s take a look:
Retirees who need extra income
Because the cost of living is high in many parts of the country, it’s hard for people to buy a home, pay it off, raise children and save for retirement, says Annie Kvick, a Certified Financial Planner with Money Coaches Canada in North Vancouver. This can leave many short of cash in retirement, when they have fewer borrowing options because they’re no longer receiving income.
A reverse mortgage is one tool retirees can use to pay for expenses like groceries, home repairs or medical care, Kvick notes. It’s also an option for retirees who are covering their expenses, but want to gift money to someone now, rather than waiting to pass along those funds in their will.
However, Kvick notes, it’s important to have a plan for using reverse mortgage funds—otherwise, she says, “you might spend too much in the early years and then run out of money.”
Retirees who want to stay in the family home
Many people prefer to stay in their family home when they retire, and for good reason. “You’ve created a community, you have friends there, it may be close to shops and hospitals, and it’s also costly to sell and buy [another] home,” says Kvick.
A reverse mortgage can help you stay in your current residence, whether you need the loan money to pay for daily expenses, property maintenance, or renovations to make your home more accessible in terms of mobility.