Recently I read an article on www.investopedia.com about the “5 signs reverse mortgages are a bad idea”. It got me to thinking about all the benefits that I have identified about using Sell ‘n STAY® and the ones that I might have missed. In retrospect these are probably more important than the previous 24 benefits that I had identified.
In the article, the writer identifies 5 facts about Reverse Mortgages that we are all aware of:
- This is a LOAN not a gift. Interest charges accumulate and are compounded annually.
- Having a reverse mortgage could cause problems if your heirs do not have the funds needed to pay off the loan.
- Hefty fees and high-interest rates, that can cannibalize a substantial portion of a homeowner’s equity.
- If you have friends, relatives, or roommates living with you who are not on the loan paperwork, they could conceivably land on the street after your death.
- This is not a short-term fix this is a life time commitment
Therefore after reading the article I realized 5 more reasons to love Sell ‘n STAY® and how our solution addresses these concerns to make a majority of the them go away. Such as:
1.With a Reverse Mortgage, along with all of the other start up fees, you pay mortgage insurance. The reason for this is upon your death if there is a shortfall between what you own on the loan and what your house is worth the mortgage insurance kicks in and protects the lender however not your heirs.
With Sell ‘n STAY® not only are there no upfront mortgage insurance premiums to be paid but because it isn’t a loan, there is nothing your children are burdened with. In fact, because you sell your property and are renting there is no large asset to pay probate on. No capital gains on your primary residence either. (Don’t feel like you are cheating the Government though because instead of paying probate the buyer is paying land transfer tax)
With a reverse mortgage upon your death probate needs to be done first, even before you can sell the house to pay off the reverse mortgage loan. In Toronto, this could take up to a year but normally between 6 weeks to 6 months. For my own son who purchased a Estate sale he waited 18 months. During that time the house sale can’t close. So the estate has to pay for the property taxes, the heating and electricity. If the Reverse Mortgage is not satisfied in a certain period of time additional fees will be charged to the estate. Then you need to sell the home. Even in a brisk market with your house selling in a few days, there is usually a 2 month lag before the transaction even closes.
Recently, I spoke to a son whose mother had taken out a Reverse Mortgage and he said it was a legal nightmare dealing with Probate, the will, the reverse mortgage, and getting the house ready to sell, and then the final move out was at most times more than he could bare. He didn’t even have time to mourn, never mind figuring out how to pay the legal and funeral bills. In the end, he had to take out a second mortgage just to satisfy the debts.
With Sell ‘n STAY® there is no probate on a house, there is no loan, no getting the house ready to sell. The heirs simply clear out the house and leave it broom swept condition and hand the keys back to the Landlord.
2. Homeowners who obtain reverse mortgages must live in the house in question, or else the loan can be nullified, and lenders may foreclose on the property.
With Sell ‘n STAY®, if in 2, 3, or 5 years you change your mind you can move with no penalty. This is a very important difference. So not only do you get 100% of the equity that you earned while you owned the property but you have the freedom to change your mind and move somewhere else. People who use Sell ‘n STAY® know that even in 1 year things change and so the greatest benefit with Sell ‘n STAY® you get all your money up front with no back end fee or penalties so that if life changes you can change along with it.
3. With the reverse mortgage if you have friends, relatives, or roommates living with you who are not on the loan paperwork, they could conceivably land on the street after your death. This could also be their fate if you move out for more than a year because reverse mortgages require borrowers to live in the home, which is considered their primary residence.
One solution is to list your boarders on the loan paperwork, however, no one living with you under the age of 62 may be a borrower on the reverse mortgage.
With Sell ‘n STAY® you can list anyone over the age of 18 on the paperwork. They will be responsible for paying the rent. I heard of a granddaughter who moved in for 2 years to care for your grandmother. Upon the grandmother’s death she wanted to continue living in the home. However, the rest of the extended family wanted to sell the house and get their inheritance. With Sell ‘n STAY®, they would get their money, she could continue renting and the fighting would not have continued for 2 years.
4. With a reverse mortgage failure to stay current with your property taxes, homeowner’s insurance premiums, mortgage insurance, and home maintenance may cause lenders to call the reverse mortgage due. If you have no equity you will lose everything.
Most of my clients forget that they have a landlord, accept when it comes to dealing with emergencies. It is no longer their problem. As long as you stay current with your rent the rest is in the hands of the landlord. Since you get 100% of your equity paid up front you are in fact debt free. Therefore investing your money the interest/dividends go a long way to offsetting your rent. Making the payments manageable.
5. Reverse mortgages are not for short term fixes.
Reverse Mortgages are long term commitments because in the short-run, steep up-front costs make such loans economically impractical. These costs include lender fees, initial mortgage insurance costs, ongoing mortgage insurance premiums, and closing (a.k.a. settlement) costs, such as property title insurance, home appraisal fees, and inspection fees. Homeowners who suddenly vacate or sell the property have just six months to repay the loan. And while borrowers may pocket any sales proceeds above the balance owed on the loan, thousands of dollars in reverse mortgage costs will have already been paid out.
With Sell ‘n STAY you can use it for 6 months ( while building a cottage that you plan to retire to) or a lifetime. Since there are no additional up front costs, no ongoing cost and no back end costs you have the luxury to make decisions in your leisure. There are Real Estate fees but you would have to pay those too in any transaction involving your greatest asset.
So with these facts in mind making an appointment is as easy as contacting us using our contact us page. We have Realtors trained and available to talk to you in every area in Ontario. Call us or email because together we can make amazing things happen.
