Thursday, July 02, 2020

Seniors Raid Home Equity - Reverse Morrgage Debt Grows


Canadian Reverse Mortgage Debt

Hits $4.21 Billion - Up 15% over last year


Reverse mortgage debt in Canadian Dollars Jan. 2010 - Jan. 2020
Source: regulatory filings Better Dwelling

Better Dwelling reports reverse mortgage debt is growing very quickly, rising 15.09% in April 2020 over April 2019 as Canadian seniors raid their home equity.

Reverse mortgages release equity in the home with no fixed repayment schedule. The money can be paid out in installments or in a lump sum. The rates for a reverse mortgage are typically higher than a HELOC. Repayment is not required until the home is sold, or the borrower dies or there is a default.

While there is not a scheduled repayment of the loan, the interest clock is ticking away in the background, which over time can greatly diminish the equity in the home.

The interest rates are usually higher than a conventional mortgage, there are appraisal fees and mortgage insurance and other setup fees depending on which lender you are dealing with. It is a way to get cash out of the equity you have built up in your home, but it is not without costs which can greatly reduce the equity in your home that is left to your estate.

Comment: the word mortgage comes from an old French word which literally meant dead pledge. The system allows you to pay the banks interest on a loan that is created with the stroke of a pen. They then charge you interest (rent) for 25 or 30 years until you finally 'own' the home. Now, they are wanting to engage you again at an even higher rate. It could be this whole system is rigged, and it isn't in the common man's favour.



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