‘Accredited Senior Agents’ have been educated in the special real estate needs of those 55 and older.
Clients often ask “Is a reverse mortgage (RM) right for me?” As real estate is all about equity, here are some things to know about reverse mortgages.
All borrowers for the RM must be 55 or older and own the property entirely or nearly. Any outstanding loan secured by the property must be paid out by the RM. There are no income requirements for the RM since it is based on the equity of the property. The owners retain title to the property and remain responsible for all maintenance, property taxes, fire insurance, and condo fees. Appraisal and legal fees associated with setting up the RM could amount to $1,500 or more. As there are no payments and the interest accrues each month, the amount borrowed doubles every 7 to 8 years (i.e. a $50,000 loan becomes $100,000). The RM cannot accumulate debt beyond the fair market value of the property.
The RM becomes due and payable when the borrower dies, sells the property or moves. If it is paid back before it reaches the term there may be substantial penalties.
The proceeds of the RM are considered an advance and are not taxable income, and will not affect Old Age Security or the Guaranteed Income Supplement. The proceeds of the RM can be used for any purpose. If the RM is used to purchase non-registered investments, the interest charges for the RM may be deductible from any investment income earned.
These are basic guidelines only. Taking a reverse mortgage is a big decision which should first be discussed in depth with your financial advisor and accountant.
Submitted by Sharon O’Shea and Monica Hendel, Edge Realty Solutions Brokerage
