(NC)-As baby boomers approach retirement, some will realise their nest egg is smaller and maybe more fragile than they'd hoped.
When that reality kicks in, they might work a little longer or rethink how and where they will spend their after-work years. For those who want to stay in their homes, tapping into their home's equity through a reverse mortgage may seem an attractive solution.
A reverse mortgage is pretty much what it sounds like: a mortgage, but the other way around. Typically, if you are mortgage-free and at least 60 years old, a reverse mortgage makes available up to 40 per cent of your home's appraised value. Unlike a conventional mortgage where you have loan repayments, reverse mortgages don't require principal or interest payments during your loan's term.
You still own your home, but when you move or die, the loan is due in full. If you chose not to make monthly payments, you or your estate would owe the lender the full principal plus accumulated interest charges, as outlined in your agreement. Depending upon the interest rate charged, after 15 years you or your estate could owe the lender two to three times the original loan in principal and interest.
If you want to access your home's equity to travel, treat your family and friends, or keep up with house repairs, you may have other options. A financial advisor can review your options and suggest alternatives to reverse mortgages such as the Manulife One all-in-one account or a secured line of credit. Not only could you be charged a lower interest rate, but you would also get more control over how much you borrow and repayment terms.
More information on this topic is available online at manulifeone.ca or toll-free 1-877-765-2265.
- News Canada