Debunking 10 Complaints Against Reverse Mortgage Solutions

Thinking about getting a reverse mortgage but hearing complaints about them from others who have looked into this financial option? We understand the hesitation — it’s important to have all the facts! At the Seniors’ Lending Centre, we believe in providing informed, easy-to-understand guidance when it comes to your mortgage investments. After all, you’ve worked hard for your savings and deserve the peace of mind for all your financial decisions.

Let’s address some of the more common complaints against reverse mortgage solutions. 

“I Don’t Want the Bank to Own My Home.”

This isn’t true. In fact, when taking out a reverse mortgage in Canada, you always remain the owner of the home — the deed never winds up in the hands of any lenders! The title is preserved, and your new reverse mortgage is registered to it just like any other mortgage. All that’s needed, as we’ve outlined on our page of common misconceptions, is for you to keep up with property tax payments, maintenance, and associated fees. You should also have an active fire insurance policy. 

“It’s too Expensive!”

Let’s clarify and examine the approximate costs of a reverse mortgage, as it isn’t as expensive as it’s known to be. There are appraisal and independent legal advisory costs ($300 to $600 each). In addition, conveyance, closing, title insurance and administrative fees are one-time costs of around $1,795 when taken together as a package.

Does this sound familiar? That’s right, these are similar to the costs found when taking out a conventional mortgage. Also, the interest rate that you select is also slightly increased, as you are paying a small premium for the luxury of never making a monthly payment. If you can budget and plan carefully, this won’t feel anything close to ‘too expensive,’ especially when factoring in the perks of a reverse mortgage! 

“I Have Bad Credit.”

You’re in luck. As long as you are a homeowner 55 years or older, you’re eligible for a reverse mortgage, regardless of your income and credit score. This is especially useful if you need an extra source of income during retirement without the demands of set payments.

“Aren’t there Scams?”

As a matter of fact, that’s not really the case here in Canada. There’s a lot of misinformation out there, and it’s important to pick up on the red flags. For example, if you happen to be reading about a reverse mortgage scam, chances are high that the content focuses on American audiences. This is important to bear in mind because, in the United States, there is a dizzying array of lenders and providers to choose from. 

On that note, compared to other countries, Canada’s banking rules are notoriously strict. In addition, the preventative measures the banks use, including monitoring methods, are completely different. When these precautions are combined with the services of a mortgage expert, you’re guaranteed only to be working with verified, dependable lenders while getting the best possible solution. Mortgage experts can help to alleviate concerns, eliminate guesswork, and make the process incredibly smooth.

“I’m Overwhelmed!”

We hear this all the time from seniors who turn to us for assistance — there are too many options out there, the information can be hard to digest (especially if you’re new to reverse mortgages), and they aren’t comfortable making significant financial decisions if they are unsure whether this is really the right approach for their needs. Again, that’s where our services can come in handy. We encourage plenty of questions and welcome discussions to alleviate concerns, steering you and your finances in the right direction. We’re particularly proud of the work we’ve done to help seniors discover the benefits of a CHIP reverse mortgage. 

“I’m in Enough Debt.”

It’s wise to think about your existing debt. The good news is that the money you get from your reverse mortgage can be used to pay off your other debts, like credit cards and loans. Even if you have another mortgage, you may qualify. However, in this case, your existing mortgage needs to be paid off first with your initial advance. Once you’ve finished this, you can use the rest of the money for your other debts or whatever you like! 

The CHIP reverse mortgage brings you the reassurance that you won’t have the traditional worries of debt, like making monthly payments on time. You won’t have to pay anything back until its due date, which is flexible, and you’ll never owe more than what your house is worth, given that you fulfill your obligations.

“I’ll End Up Owing More than the Value of my Home.”

The CHIP reverse mortgage is a non-recourse loan, which means that as long as you have met your obligations, like paying your property taxes and maintaining your home, the amount you owe in the end is guaranteed to never exceed the fair market value of your home. Keep in mind that this guarantee excludes administrative expenses and interest accumulated after the due date. If your home depreciates and your mortgage is more than the sale price, HomeEquity Bank covers the difference. However, since houses usually appreciate, this case is rare. In many cases, clients still have equity left in their homes after paying back their reverse mortgage.

“If I Pass Away, my Heirs will be left with Nothing.”

If you pass away, your estate will be probated by your executor, and the reverse mortgage will be treated just like any other mortgage. Your heirs can keep the home by paying off the reverse mortgage or sell to pay for the amount owed. As outlined above, your heirs will not owe an amount that exceeds the house’s value because of HomeEquity Bank’s Negative Equity Guarantee. The same obligations and exclusions apply.

“I’ll Have to Pay Taxes on the Money I Borrow.”

One of the many benefits of a reverse mortgage is that the money you receive does not qualify as taxable income. This sum will also not affect your government benefits, like the Old Age Security (OAS) or Guaranteed Income Supplement (GIS).

“What if I’m Forced Out of my Home?”

You can remain in your home as long as you like. The repayment date of your reverse mortgage will not come into effect until you move, sell, or pass away. Since there are no monthly fees required, you can’t get evicted.

Need a hand with your reverse mortgage planning or deciding which option is right for you? Sifting through all the information online can be overwhelming. That’s why we’re more than happy to help here at the Seniors’ Lending Centre to bring you the most accurate responses to your curiosities and concerns. Contact us today to learn more!