1.877.754.2004 Request A Quote
Google Play Ap Store
Apple AP Store

Dominion Lending Centres

Dominion Lending Centres Forest City Funding
FSCO# 10671

Mortgage Broker Ontario

  • About
    • Benefits of Our Mortgage Services
    • Mission Statement
    • About Us
    • The Owner
    • Testimonials
    • Awards & Recognitions
    • In the Community
  • Services
        • Condominium Corporation Loan
        • Snowbird Financing
        • Mortgage Life Insurance
        • Mortgages
          • Purchasing a Home
          • Refinance / Consolidate
          • Switch / Transfer
          • Home Equity
          • Reverse Mortgage
          • Spousal Buyout
          • Mortgage Renewal
          • Commercial Mortgage
        • Leasing
          • Using a Leasing Professional
          • What we Lease
          • Leasing Vendor Programs
        • Merchant Cash Advance
          • Merchant Advance Program
          • FAQ – Merchant Cash Advance
  • Calculator
  • Rates
  • Apply Online
  • Blog
  • Contact
  • About
    • Benefits of Our Mortgage Services
    • Mission Statement
    • About Us
    • The Owner
    • Testimonials
    • Awards & Recognitions
    • In the Community
  • Services
        • Condominium Corporation Loan
        • Snowbird Financing
        • Mortgage Life Insurance
        • Mortgages
          • Purchasing a Home
          • Refinance / Consolidate
          • Switch / Transfer
          • Home Equity
          • Reverse Mortgage
          • Spousal Buyout
          • Mortgage Renewal
          • Commercial Mortgage
        • Leasing
          • Using a Leasing Professional
          • What we Lease
          • Leasing Vendor Programs
        • Merchant Cash Advance
          • Merchant Advance Program
          • FAQ – Merchant Cash Advance
  • Calculator
  • Rates
  • Apply Online
  • Blog
  • Contact
You are here: Home / Blog / Top 3 Misconceptions About Reverse Mortgages

Top 3 Misconceptions About Reverse Mortgages

October 14, 2020 By Administrator

The top 3 misconceptions about reverse mortgages are!

The Bank Owns Your Home.

Your Estate Can Owe More Than Your Home

The Best Time to take a Reverse Mortgage is at the End of Your Retirement

Let’s examine each misconception
in more detail.

 

1. The Bank Owns Your Home.

Over 50% of Canadian homeowners over the age of 65, believes the bank owns your home once you’ve taken a reverse mortgage. Not true! We simply register our position on the title of the home, exactly the same as any other mortgage instrument, with the main difference in the flexibility of not having to make P&I payments on the reverse mortgage.

2. Your Estate Can Owe More Than Your Home

A reverse mortgage, unlike most traditional mortgages in Canada, is a non-recourse debt. Non-recourse means if a borrower defaults on the loan, the issuer can seize the home asset, but cannot seek any further compensation from the borrower - even if the collateral asset does not fully cover the full value of the loan. Therefore, when the last homeowner dies (and the reverse mortgage is due), the estate will never be responsible for paying back more than the fair market value of the home. The estate is fully protected – this is not the case for almost any other mortgage loan in Canada, which is full recourse debt. So read the fine print the next time you offer to co-sign for a loan for mom!!

3. The Best Time to take a Reverse Mortgage is at the End of Your Retirement

This is a common mistake that reflects the “old-school” financial planning mentality.

For the majority of Canadians (without a nice government pension), the old school financial planning mentality is about cash-flow, and is as follows:

  1. a) Begin drawing down non-taxable assets to supplement your retirement income.
  2. b) Once your non-taxable assets are depleted, begin drawing down more of your registered assets (RSP/RIF) to supplement retirement income.
  3. c) Once your registered assets are depleted, sell your home, downsize and re-invest to generate enough cash-flow to last you until you die.

The problem with the “old-school” financial planning model is two-fold:

  1. 91% of Canadian seniors have no plans to sell their home (CBC News “Canadian Boomers Want To Stay In Their Homes As They Age).
  2. You are missing out on a huge tax-saving opportunity by not taking out a reverse mortgage in the beginning of your retirement.

“Research has consistently shown that strategic uses of reverse mortgages can be used to improve a retiree’s financial situation, and that reverse mortgages generally provide more strategic benefits when used early in retirement as opposed to being used as a last resort.” - Jamie Hopkins, Forbes

In Canada, a reverse mortgage can be set-up to provide homeowners with a monthly draw out of the approved amount. For example, the client is approved for $240,000 and decides to take $1000/month. This is deposited into the clients’ bank account over the next 20-years. Interest accumulates only on the amount drawn (i.e.: not on the full $ amount at the onset).

This strategy allows clients to draw down less income from their registered assets to support their retirement lifestyle. In turn, this can create some excellent tax savings, since home equity is non-taxable. Imagine lowering your nominal tax bracket by 5 – 10% each and every year over a 20 year period?! The tax savings can be huge.  You are also able to preserve your investable assets, which historically, can generate a higher rate of return when invested over a greater period of time.

In summary, Canada and the U.S. both have aging populations and both have misconceptions about reverse mortgages. Learning about these reverse mortgage misconceptions will help allow you to balance your retirement lifestyle and cash-flow, this allows the desire for retirees to age gracefully within their own homes.

Contact us today and check out our reverse mortgage rates.

Filed Under: Blog

Free Mortgage Review

Find out how much your home is worth.





    Contact a Mortgage Agent

    Oakville, Mississauga & Burlington: 905.491.6911

    Toronto & GTA:
    416.915.3155

    Hamilton & Vaughan:
    1.877.754.2004

    Naples & Miami:
    Toll Free: 1.877.239.1588
    Direct Line: 239.488.3380

    Fax:
    1.877.772.5337
    239.488.3379

    Toll-Free:
    1.877.754.2004

    Email:
    mortgageadmin@dominionlending.ca

    Request a Call Back

    Let us call you back when it's convenient for you!

      Google Play Ap Store
      Apple AP Store
      Cameron Mackie -Mortgage Broker Licence #M08008827
      Independently owned and operated ©Copyright 2023
      Dominion Lending Centres Forest City Funding - Broker Licence #10671
      Sitemap
      Request a Quote

      No Obligation Quote

        Canadian Buyer's Guide to Florida Real Estate

        Welcome

        In order to receive your free book we require some details from you.

        We do not ask for your phone number, and we will never attempt to contact you by phone, unless you ask us to. We will never sell or share, your information with third parties.

        Please forward our website link to your family and friends. They can download The Book for free as well. However, you agree, in order to receive The Book, to not copy, or forward an electronic copy of the Book, once you have downloaded it, as this will not count towards our official download statistics.

        IF YOU FIND THE INFORMATION CONTAINED IN THE BOOK HELPFUL AND INFORMATIVE, PLEASE CONSIDER USING OUR BROKERAGE SERVICES.

        Thank you and happy reading.

        Due to new anti-spam laws, you must check the I AGREE BOX, that signifies your consent to receiving The Book, and that you consent, to receive our Newsletter. You can unsubscribe from the Newsletter at any time. Please complete the form below to download the book.

          I agree to the terms above

          Certified to provide the best advice to Canadian Snowbirds

          Our brokerage is Certified to provide the best advice to Canadian Snowbirds, we provide guidance on finances, immigration, legal, tax and accounting issues that arise as a Snowbird. Additional to our expert advice, we also have a strong network of professionals to eliminate any stress common to owning property in the U.S.

          Thank you for reaching out to us, we will be in contact very soon. Have a great day!