Lifestyle mortgages – also known as reverse mortgages – are growing in popularity as more Canadians look for solutions to make their money go further. If you’ve been contemplating the possibility of a lifestyle mortgage, you likely have questions about what they are and how they could potentially benefit yourself or your family.
We’ve been chatting with local Surrey mortgage broker Rich Ulvild about lifestyle mortgages and while last time we discussed the Who, What, Where, When and Why of lifestyle mortgages, this week we’re tackling some common misconceptions.
We asked Rich to help separate the facts from fiction on the top questions he gets asked by his local Surrey clients when considering a lifestyle mortgage.
Fiction: A Lifestyle mortgage puts me at risk of losing my home.
Fact: “I hear this concern the most with my clients,” Ulvild says. “The truth of the matter on this concern is quite simple: The chances of the bank taking your home due to a lifestyle mortgage is extremely unlikely. As long as you stay up-to-date on your property taxes, home insurance and dutifully maintain your home, then you’ve upheld your side of the agreement.
“Even if something happened to the market – which statistically is very unlikely – the most you can take out in a lifestyle mortgage is 55 per cent of your home’s worth. That, and a variety of other failsafes, such as a No Negative Equity Guarantee are designed to ensure the safety and security of a lifestyle mortgage as a financial option for those who need them.”
Fiction: I’ll lose the equity in my house.
Fact: If we look at market trends, housing prices in Canada have continued to rise steadily. Even if you took out half of what your home is worth – the max amount allowed – your home’s worth would only need to increase by half the interest rate of the lifestyle mortgage for you to not lose any equity, Ulvild says.
Fiction: A lifestyle mortgage is a last-resort financial option.
Fact: “Nothing could be farther from the truth,” Ulvild says. “Thousands of Canadians are already using Lifestyle mortgages and what they really provide is a smart financial strategy.”
Since the funds are coming from the equity in your home, they’re tax free and will not affect your pensions or benefits. A reverse mortgage can help you preserve your other financial investments and therefore ensure all of your assets are working for you – including your home.
The final take away on lifestyle mortgages is to double-check where your information is coming from. “Many misunderstandings come from our U.S. neighbours, whose reverse mortgages work very differently from ours in Canada,” Ulvild notes. “Here in Canada, we have many more regulations and safety nets in place to protect you and your home.”
Watch for our next Q&A session with Rich Ulvild, where we will be taking a look at how you can utilise the income from a lifestyle mortgage to make accessibility renovations to your home.
For more information about this and all your other mortgage-related questions, call Rich Ulvild at 604-803-1456, email rich@mylendingexperts.ca or find additional information online here.