Seniors' corner

Reverse mortgages

A reverse mortgage may seem like a good way to unlock the equity you’ve built up in your house, but it’s not always the best option.

Pros and cons

Instead of making payments like you would on a regular mortgage, the interest accumulates and the equity in your house declines.

The advantages are:

  • You can turn equity in your home into cash
  • You still own your home
  • You can choose options how to receive your money, either as regular payments or as a lump sum (or a combination of both)

While the pros sound good, there are also many disadvantages:

  • The equity in your home will shrink as the interest on the reverse mortgage accumulates
  • The interest rate is higher than on a line of credit
  • Your estate will have to repay the loan quickly when you pass away
  • There are numerous charges associated with a reverse mortgage, such as appraisal, application, closing, and legal fees
  • You’ll face a repayment penalty if you sell your house or move out within a three-year period of getting a reverse mortgage

Another option

A home equity line of credit (HELOC) can be a better option for many homeowners. Interest rates are much lower on HELOCs than a reverse mortgage (currently as much as 1.5 percentage points lower).

Which term is right for you? Contact me at 416.298.8200 to discuss your situation.

Peter West

Peter West

Sales Representative
CENTURY 21 Percy Fulton Ltd., Brokerage*
Contact Me