Reverse mortgages: the pros and cons

Is a reverse mortgage a good idea for retirees in the Okanagan?

It depends on your goals, and it has real trade-offs. A reverse mortgage lets homeowners, usually 55 or older, borrow up to 55% of their home's value with no regular payments, but interest builds over time and reduces the equity left for you or your estate.

Here's how the Financial Consumer Agency of Canada lays it out:

• Pros: you stay in your home and keep ownership, there are no required payments until the loan comes due, and the money is tax-free and does not affect Old Age Security or the Guaranteed Income Supplement.
• Cons: interest rates are usually higher than a regular mortgage or home equity line of credit, there are appraisal, legal and setup costs, prepayment penalties can apply, and your estate must repay the full balance within a set time.

The loan comes due when you sell, move out or pass away. Some Okanagan owners compare it with downsizing to a smaller home. I walk through that option in my downsizing plan and downsizing in Vernon.

Sources: Reverse mortgages, Financial Consumer Agency of Canada, Borrowing against home equity, Financial Consumer Agency of Canada.

General information only, not legal or tax advice. Talk to a lawyer or accountant.