The first ever reverse mortgage that I did was for an existing client. Dave and Lisa were retirees who had taken on a bit too much debt. I helped them find a second mortgage on their home to consolidate their debts and get their monthly payment down. We planned to combine the first and second mortgage with a refinance when the term on the first mortgage came due. Unfortunately, in the eighteen months between funding the second mortgage and the end of the term of first mortgage, Lisa got quite ill and passed away.
Our original plan was no longer workable. Dave could no longer qualify for a mortgage with only his pension income. I proposed a reverse mortgage. The lender would pay off the existing first and second mortgages. The lender would become the mortgage holder against the title of his home. Dave would not have to make payments on the mortgage, instead interest would be added to principal monthly. I urged Dave to carefully discuss it with his and Lisa’s children.
Pros and Cons of a Reverse Mortgage
Together they came to the conclusion that a reverse mortgage made sense. Firstly, it would allow Dave to stay in the house he had shared with Lisa. This was important because Dave had looked at the housing market and quickly realized that even with a sizeable down payment from the sale of his house, there was little he could afford. Secondly, with a reverse mortgage, Dave would not have to make monthly mortgage payments that were at the time eating up his pension and not allowing him any disposable income. Finally, they considered that his and Lisa’s children would not receive as much in the form of an inheritance. For Dave’s immediate quality of life however, a reverse mortgage made sense.
Months later Dave called to thank me. Lisa’s passing had caused him significant financial stress. With only one pension coming in, almost all of his income was going to service the mortgages. The reverse mortgage freed Dave up from this stress and allowed him to start navigating this new phase of his life.
If any of this resonates with you, please get in touch with me at: bturner@nextdayapprovals.ca or 249-353-3278