Reverse mortgages rising fast to deal with retirement shortfalls
Article by Garry Marr, Financial Post, May 31, 2014
“It could become a growing solution to our retirement savings problems, but opponents of reverse mortgages warn their spike in popularity could mean shrinking inheritances.
HomEquity Bank, which is owned by Birch Hill Equity Partners, and is behind the Canadian Home Income Plan, said reverse mortgages are up 26% year-to-date compared to the same period a year ago. It’s still a relatively tiny chunk of the 5.5 million mortgages outstanding, considering HomEquity only expects to issue about 3,000 reverse mortgages this year.
But is it a solution for people whose retirement savings don’t match their retirement spending? The interest costs, which are generally above market rates for a traditional mortgage, will ultimately eat into home equity and not leave much behind for heirs.”
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