Heading towards retirement, and wanting to fund your lifestyle without relying on anyone? Love your residence and loathe the idea of ‘downsizing’ to access your equity as savings?
A reverse mortgage is an option many retirees consider: it is best understood as using your home equity as security against a loan. This loan allows you to own and remain living in your home as long as you need. Interest is charged on this loan, but you do not typically make repayments while living there: this interest compounds and is added to your loan’s balance and must be paid when you sell your home, go into care or pass away.
Make sure to consult with your broker or financial advisor before jumping into a reverse mortgage: risks to consider include the higher interest rates typically associated with such loans, compounding interest costs and the potential of the loan affecting your ability to receive the pension. There are benefits too – such as an income source that doesn’t mean selling your home. A great option for some retirees, but not a one-size-fits-all solution.