A reverse mortgage is a loan secured against the value of your home. On this segment of The Marc and Mandy Show, Pam Pikkert shares info about how reverse mortgages work.
Pam Pikkert: There is a lot of misconception around reverse mortgages. More and more people are needing to access some additional funds for their retirement because people are just living a lot longer and staying in their home a lot longer. In this situation, what we’re able to do is get what’s called a reverse mortgage on their property. People think the bank then owns their home, but that’s not at all the case. The people still own their home as long as they live in the property. The only time that mortgage has to be repaid–there are no payments necessary ever until somebody either moves into a retirement home or if there’s a death.
Reverse mortgages are good for quite a variety of people. Somebody who is looking to purchase a new property before they have sold their existing one. We can access the equity in the current home to help buy the new home and then when the current home sells they can pay out the reverse mortgage in full. Additionally, maybe people want to leave their investments in for a little bit longer so that they can get a better rate of return. In that case, they can live tax-free on the money that they take out through the reverse mortgage and leave their investments where they are. We also see people using them to travel or to even give to their family members so they can watch their family members enjoy that money while they’re still alive.
So, the reverse mortgage does have some fees associated with it. One of the fees definitely is independent legal advice. We want to make sure that anyone getting a reverse mortgage is doing it because it’s actually what they want and not because of any family pressure to do. So, there will have to be an appraisal done on the property, which is about $350 and the independent legal advice is about $1,500.
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