With baby boomers on the cusp of retirement, reverse mortgages are coming more and more into vogue. You have to be 60 to qualify. It’s essentially a loan based on your home equity, but you don’t have to make any payments until the house is sold or you pass away. Patricia Lovett Reid , Vice-President of TD Asset Management says this can a good option, especially for people who have most of their assets tied up in their homes.
“For those you want to stay in their home, diversify their assets by taking some money off of that table, some will invest it back into the market for additional income.”
Make sure you understand the fine print – the set-up costs, whether you’ll have to pay a penalty if you move into a nursing home, and how the interest is calculated.
“It may be the right product for you, but you really have to understand that it isn’t interest-free and that the interest clock doesn’t stop just because all of a sudden you are not making a payment on it.”
Lovett-Reid cautions against taking too much out of your home early on in retirement. You want to make sure you’ll have enough money for the rest of your life.