Articles and Blogs

March 6^th 2022 - Philip Roe

More and more Canadians are turning to reverse mortgages. The ability to borrow against equity in your home without having to make regular payments is attractive to Canadians of all income ranges. But what is the future of reverse mortgages in Canada?

There have been questions about the viability of reverse mortgages. Questions like whether or not they are the best idea for homeowners. They are not going anywhere in the near future. So, having a better idea about the future of reverse mortgages can be helpful.

What Does the Future of Reverse Mortgages Look Like?

Depending on who you ask, the view of reverse mortgages is that they should be a last resort. Experts feel that housing wealth should be preserved as a last resort kind of option. After all, if that housing wealth isn’t absolutely necessary, then the home’s equity can be preserved for future uses.

To understand the future of reverse mortgages, we must first understand the criticisms and positives to this method of borrowing. By the end of this piece, you will be educated on reverse mortgages. More importantly, you’ll know how they may or may not be able to help you.

Criticisms of Reverse Mortgages

The simple fact is that the future of reverse mortgages will depend on the needs of homeowners. The main criticism of reverse mortgages are the rates involved. Most comparable five-year reverse mortgage rates tend to be at least double the typical mortgage rates (which can be as low as 2.5%).

Even home equity line of credit (HELOC) has rates lower than those of reverse mortgages. The other major criticism is the overall level of debt that seniors have and what their options (if any) may be. It is that lack of options that even makes a reverse mortgage a possibility.

The simple fact of the matter is that reverse mortgages give seniors access to the money that they need. That may be due to a lack of retirement savings or income, a balance left on a traditional mortgage, or much needed renovations.

Why are Reverse Mortgages on the Rise?

Though there are hefty criticisms of both the current state and future of reverse mortgages, there is a reason that they have grown in popularity. One major reason is a decline in retirement savings and income. We all want to retire at the appropriate age. Planning and unforeseen circumstances can put a major hindrance on those retirement plans.

It also comes down to the fact that borrowing costs are lower and there have been significant gains in equity. When you can borrow more for less – and your home is worth more than ever before – it becomes a more attractive option.

Reverse mortgages also provide flexibility. Major renovations, for example, can cost a serious amount of money. Taking out a loan for that amount requires monthly repayment. In times where retirement income is lower, that can be a major caveat for traditional lending.

Being able to borrow against the value in one’s home and not having to pay it right back is a major selling point for Canadian seniors. Moreover, it is access to serious sums of money; upwards of $100,000. Those types of sums are typically not had cheaply or on short notice.

Though they certainly have their downsides, the future of reverse mortgages will be secure so long as Canadian retirees need serious funding without traditional options. No matter the need, that flexibility is what makes reverse mortgages such an attractive option to begin with.

Who Do I Talk to About the Future of Reverse Mortgages?

The first thing that you should do if you want to discuss a reverse mortgage is call Lotus Income. We are here to get you the most equity out of your home and put the most money into your pockets.

Reverse mortgages can seem like a complicated endeavor, so it is important to discuss all of your options first. We can run through the pros and cons of reverse mortgages and determine if it is the right fit for your needs.