Reverse mortgages deserve careful consideration, Advocas says


    While Advocas hasn’t conducted formal surveys among its members to gauge customer interest in them, Pollock does recognize reverse mortgages as a financial product that people might want to consider. With home values ​​rising at an exceptional rate across Canada, he says, this creates a lot more room for homeowners to mortgage their home with a reverse mortgage.

    «If you use any of these products, there will be no impact on your retirement savings, OAS or GIS for guaranteed income supplements,» he adds, noting that reverse mortgages allow individuals to access their home equity tax-free.

    But even if the products don’t weigh on retirees’ other sources of income, they can still open up some other potential planning traps. Pollock suggested that Canadian retirees with estate plans should exercise a degree of caution, since using their home equity in a reverse mortgage could affect their ability to leave a portion of their estate to their adult children, for example.

    “When you need money, there are different strategies you can use to secure cash flow into the future. But you have to look at the bigger picture,” he says.

    Recent research from the US suggests that reverse mortgages may actually help protect against risks faced by some homeowners. A study conducted by Finance of America Reverse (FAR), a US-based retirement solutions company, found that American retirees who are able to take out reverse mortgages may reduce their exposure to volatility in investment markets and their net worth by a significant amount over the course of a 30-year retirement.

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