With house prices out of reach and desperate to get their hands on hard cash quickly, many homeowners are expected to use reverse mortgages to help their off-springs buy their first property.
While reverse mortgages have been available since the introduction of the Canadian Home Income Plan in the mid-1980s, very few financial lenders have openly offered the product. However, with an aging population and dependent children needing help with down payment, there has been a report of rising interest in this financial method.
However, one real estate broker says this should only be used as “an option of last resort.”
Speaking to CREW, mortgage Marc Abramovitz from Northwood Mortgage and founder of ilovemymortgage.ca, says he would advise his clients against this option.
“I can understand why many homeowners would be attracted to this type of finance as it’s a fixed rate compared to a HELOC, and it’s a way of getting cash quickly if you are going through a financial patch, but it’s not ideal, especially if you want to sell in the future,” he says. “There are a lot of other options available and homeowners really need to do a lot of due diligence and get independent advice before signing up for this.”
Lenders rarely give reverse mortgages to borrowers younger than 62 years-old while the loan-to-value ratio can be as low as 25 per cent after accounting for closing fees. The mortgage is paid off from the proceeds of the home’s sale.
Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate