Reverse mortgages carry hidden risks: report
Looking for a way to stretch their money, many older people are exploring reverse mortgages, which allow homeowners 60 or older to trade the equity they’ve built up in their home for a lump sum and tax-free monthly payouts.
Although still small, the number of reverse mortgages rose last year to 7,000 with an outstanding value of $837 million — just about all of that offered through the Canadian Home Income Plan Corporation program sponsored by the newly-minted HomEquity Bank, and offered through brokers and lenders.
But these loans can be terrible for seniors who don't understand the complicated rules governing them and how quickly high fees and interest charges can balloon, maintains Consumer Reports.
Looking at the much more established U.S. market, CR worries about unsuspecting seniors ending up stranded in their homes without any remaining equity to cover unexpected costs down the road.
Too often, CR claims, sales pitches to seniors appeal to emotions rather than reason, emphasizing the positives and playing down the high costs of the loans.
And while the predatory practices in the U.S. don’t seem to have crossed the border just yet, older Canadians need to be on the lookout.
Here’s AARP’s advice on the challenges of squeezing the lifeblood out the family homestead. For another “whoa boy!” take, have a look at this cautionary tale from the Money Smart Life blog.
So would you consider using a reverse mortgage to help fund your retirement?
By Gordon Powers/MSN Money
Posted by: gigger | Dec 3, 2021 5:46:55 AM
I hope all seniors that have achieved some home equity are wise enough to recognize reverse mortgages for the scam they really are. After all, what is not a scam these days? The government does little to protect it`s citizens, mostly because they perpetrate scams themselves. OLG, RSP, E Health, Billion Dollar Boondoggle, etc, etc, etc. It is little wonder why Canada ranks so high on the world corruption scale.
Posted by: Doug of Dartmouth | Dec 3, 2021 12:22:56 PM
For those seniors who are on fixed incomes and are struggling to live month to month, it is solution as they can stay in their homes until they die.
But seniors need independant legal advice from a lawyer trained in reverse mortgages. If these mortgages are granted without independant legal advice, they should be consider void.
Reverse Mortgages are advertised extensively on TV, and one has to be suspicious as to whose best interest in been served.
Posted by: I am Canadian | Dec 3, 2021 1:28:18 PM
Reverse MTG's...JUNK...Better bet from a Banker! Go see your Insurance advisor and Banker combined. Discuss (for those lucky enough to have their MTG paid off or nearly paid off) a home equity Line of Credit. Yes you may be repaying (interest Only payments) monthly should you qualify, but having a team of professionals (Stress reputable) Insurance advisor, Lawyer (yes i am laughing too) along with your banker can do this and not only help easy retirement worries, but ensure your estate is protected upon death. It's been done for less than $1,000.00 and the advice along with your Will and POA's will be priceless.
Posted by: jojo | Dec 3, 2021 2:29:29 PM
reverse mortgage is a scam, pay interst on your mortgage and then pay interest to get equity out of your house once its payed..so easy to recognize..whoever doesnt deserves to be taken.
Posted by: Keith | Dec 3, 2021 4:05:43 PM
It is common sence not to get into a reverse mortgage,when they first came out I looked at it and that is a far as I went, I could see right away that compounded interest would eat up all of the remaining balance of the house principal. If I needed any amount of money I would get and use a line of credit from the bank as the house is your secutity to them, the intrest is "at least for now at 3.25" that is a lot cheaper than a mortgage. Just a pensoner whit his oppinion. Thanks
Posted by: Mike | Dec 4, 2021 7:06:54 PM
Reverse mortgages are not a scam, no more so than forward mtge's i.e one where you make a payment. Seniors do it because they want to stay in their home. They still have kids who can't get off their butts and do something for themselves and I don't mean youngsters, I mean people who are in their mid 30's and into their 50's, still bleeding off their parents.
The parents feel obligated to help them for getting a business venture off the ground, which in many cases fail and the debt is still there. Borrowed money from the Banks when they qualified and now can't afford the payments. That is usually the time the banks call on the reverse mtge companies.
It is not a bad thing, it is a financial option, sometimes the only option they have. In Canada, people who take out reverse mtges only have to qualify on two things, they are over 60 and the property has a value to loan against. They can make payments if they wish however, they are not obliged to. Where as in the standard financing options, through banks, C.U., etc. you MUST make a payment.
There are up front fees, yes, and if you don't make any payments the interest is added onto the outstanding balance, however, the reverse mtge company is not going to come calling when you don't make the payments. With conventional financing they will and if your in arrears more than 90 days, THEY WILL TAKE YOUR HOUSE. if it isn't your cup of tea. Sell the house invest the proceeds and live your life, DEBT FREE. Don't worry about your kids, because in many cases your parents didn't help you.
Posted by: jdenishuggard | Dec 6, 2021 7:42:16 PM
hello @age 73 i have seen plenty-financed nearly every type of dev./specialised in financing hotels in western cdn cities,alaska,hawai,south pacific,caribe[have 14 phase dev in curacao-build out $300mmusd]mexico-and frankly mortgage funds make the world go around-now the rates are 4%-rediculous[sp]too low,i say people should invest in small size comm.properties-full of good tenants-set house aside-get into comm realty asset base-easy to finance-put condos on top-you get cmhc guarantee-financing is quick-in 5 years assett up by about 30%-but when selling-sell of portion only-beat capital gain taxes..........send me proposal to jdenishuggard@gmail.com-always ready to assisst-fees charged naturally-happy yule to all
Posted by: jdenishuggard | Dec 6, 2021 7:43:34 PM
why the special identity number-seems nutty/mr.huggard
Posted by: rick | Dec 7, 2021 2:45:04 PM
what a scam.suck them dry while they live,then suck them dry till the day they die.
Posted by: somaie | Dec 15, 2021 4:58:06 AM
. Small Business owners are largely forgotten. Thats why I only focus on them. I have experience several members of my family file bankruptcy due to small business failures. I also I suffered through 2 destroyed businesses due to failure however, in my failings I have learned some of the secrets to success. (Who can say they know it all?)
What I like about small business owners is that they are not afraid to take huge risks and lay it all on the line. But, I agree they do need a lot of help with their marketing. I think having them go the social media and email route is not only the least expensive but its also the most effective. Thanks for the stats!
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