Home Capital Group Inc. (HCG)

[Scott01]

Most of the people are confused when it comes to a reverse mortgage in Canada. They are worried about the hidden risks of the scheme. So, I would like to share the pros and cons of a reverse mortgage.

Pros of Reverse mortgage:
1. You don’t have to make any regular mortgage payments on it
2. You don’t have to prove your income, in order to qualify
3. The money you borrow is tax-free and does not affect your Old-Age Security or Guaranteed Income Supplement
4. You can decide how you want to receive the money (lump sum, regular payments or a combination of the two) and you can spend it on whatever you want
5. You get to maintain ownership of your property, and
6. You don’t have to pay back the loan or interest costs until you sell the home or pass away.

Cons of Reverse mortgage:
1. Interest rates are much higher than typical mortgage rates
2. As you borrow more and more equity, interest starts to accumulate faster and faster.
3. Additional setup costs (home appraisal fee, application fee, closing costs, etc.) can also add up and are deducted from the amount you’ll receive
4. The only way to get out of a reverse mortgage is to sell your home
5. You’ll be subject to a penalty if you sell the home or pass away within 3 years of taking out the reverse mortgage.
6. If you pass away, the amount you borrowed + interest must be repaid within a limited period, and
7. If you pass away, because so much money will need to be repaid to your reverse mortgage lender first, your children or other heirs will be left with less asset.