How Does A Reverse Mortgage Work? A Real Life Case Study | Reverse Mortgage Pros

[@ReverseMortgageProsCanada]

Let me know in the comments below if you have any questions - make sure and also download my free guide (which may answer your questions already) at: www.reversemortgagepros.ca/reverse-mortgage/ Thanks, Mich

[@RobertOliver-y3w]

A very informative video that answered my questions. Well presented and easy to understand. Well done!!

[@jamesdeagle]

Excellent, knowledgeable presentation! James

[@ReverseMortgageProsCanada]

Thanks James - I'm glad you found it useful. Cheers, Mich

[@jungroe]

Excellent video. Very informative and thorough. Thank you.

[@ReverseMortgageProsCanada]

Thanks - appreciate the nice comment and happy to help. Cheers, Mich

[@frank9838]

"free mortgage assessment" link is broken

[@ReverseMortgageProsCanada]

Thanks for letting me know - it should be working now: www.reversemortgagepros.ca/assessment/ Thanks again, Mich

[@claudetteanderson6725]

Thank you very informative video. I

[@ReverseMortgageProsCanada]

Thanks glad to hear it. Cheers, Mich

[@waynebeck7801]

Thanks for the video.

[@ReverseMortgageProsCanada]

You're welcome! Thanks, Mich

[@samk7197]

Best explanation thanks

[@ReverseMortgageProsCanada]

Glad I could help! Thanks, Mich

[@waynebeck7801]

Hello Mitch. Is there a way to contact you directly?

[@ReverseMortgageProsCanada]

Hi Wayne I just saw your email in my inbox now - I respond to all emails and comments personally so I'll be in touch with you shortly. Thanks, Mich

[@waynebeck7801]

@@ReverseMortgageProsCanada okay thanks

[@christelleach915]

Thank you so much

[@ReverseMortgageProsCanada]

Glad to help! Thanks, Mich

[@nancyesquibal3800]

Thank you. Now I understand a reverse mortgage.

[@ReverseMortgageProsCanada]

Thank you Nancy - glad you found it useful! Mich

[@waynebeck7801]

One thing I have learned…the interest rate is the key. If you have a five year rate of 7 .5 % that will be your rate for years 1-5. After that if the rate for year 6-10 is 8.5%. The year 1-5 rate will become 8.5% as well . You also have to rely on your home equity increasing if prices drop 25 % this year as perditions indicate your 600.000 home just became a 450,000 home.

[@ReverseMortgageProsCanada]

@@waynebeck7801 No, that's not correct at all. You can't retroactively have a higher rate applied. It works the same way as any other mortgage in Canada - you get a rate assigned on a 1-5 year term and that's the rate for that 1-5 year term, it can't be changed afterwards. At the end of the term you then negotiate for a new term and rate, which also then can't be changed afterwards. I'm not sure where you read about house prices dropping 25%, right now they're just as likely to go up 25% as they are to fall that much and then your $600,000 home becomes a $750,000 home and you keep 100% of the additional equity gained. If a 25% drop was 'expected' all lenders would stop lending mortgages (not just reverse mortgages, all mortgages). Looking at year over year house price changes is also a mistake. They vary quite a bit (in statistics they call this 'noise'). For example, in 2021 every home in Canada went up from 5% to 50% (and even more in some places) - but that's not sustainable. Over the long-term you can use 3-5% as a more realistic house price appreciation (I believe over the past 100 years the rate is actually around 4%). Thanks, Mich

[@waynebeck7801]

@@ReverseMortgageProsCanada sorry I was wrong on how that works think I understand now. Housing prices took a dip here in BC 17 % in some areas..3-4 percent dip in Victoria. Prices are supposed to go back in 2024.

[@ReverseMortgageProsCanada]

@@waynebeck7801 House prices are down almost across Canada. But that's because they previously went up at unsustainable levels (driven by low interest rates). Over the past 5 years they're still up over 5% (and over 10%, even 20%+, in many places) which also isn't sustainable either. That's why I always advise folks to use a more long-term rate of 3-6% and ignore the year to year ups and downs. Thanks, Mich

[@MikeBodnar]

Can a borrower get an accurate estimate of the "legal and admin costs" that will be charged to them prior to going ahead with the appraisal? This cost can vary between $1200 to almost $3000 according to your video. As well, some of the different types of reverse mortgages (such as Income Flex) having a floating rate as far as I could tell from the calculator. If interest rates keep rising, this could reduce the equity in the home much more quickly than the lump sum reverse mortgage where the rate remains static over 5 years.

[@ReverseMortgageProsCanada]

Great questions Mike. To answer them: 1. Yes - you'll get an exact quote on the lender costs once you apply. Part of what I do is help match folks to the lender and product that's the best fit - which includes factoring in which will have the lowest costs (considering interest rates as well). The reason I used such a wide range is that they really do vary this much from lender to lender and product to product. But they are always revealed upfront and never really hidden from the homeowner. 2. Any reverse mortgage product that involves monthly payments (rather than a lump sum) will have a floating or variable rate. You are correct that if rates keep rising this could have a bigger impact on your home equity except that (i) generally when you're taking monthly payments you're borrowing less than a lump sum - you're also spreading out the borrowing over a longer period of time, so there is less time for it accumulate interest and (ii) rates can of course go down as well as up - generally speaking variable rates are usually cheaper than fixed over the long run (at least in the last 20-30 years) and tend to actually perform very well. A good way to get some balance and reduce your risk here is to take some money as a lump sum (on a fixed rate) and then others through monthly payments (on a variable rate). That way your borrowing can be 'balanced' between fixed and variable. Hope this helps. Thanks, Mich @ Reverse Mortgage Pros

[@MikeBodnar]

@@ReverseMortgageProsCanada Thanks for the response. Mich. It would be interesting if the reverse mortgage banks would offer a product that capped interest rates on the upper and lower end. The advantage to them of course, would be that they could charge a higher interest rate than their usual variable rate now, and also make more on interest should yields drop. With the Income Flex product, can one pre-pay some of the accrued interest to save equity if one doesn't need the cash for a period of time?

[@ReverseMortgageProsCanada]

​@@MikeBodnar The fixed rate options do provide a cap on rates - but obviously only on lump sums. I guess they could offer the option to take a fixed rate every time you make a monthly withdrawal - but that rate would go up and down any way so would end up being variable - at least it's fixed past once accepted though. You can pre-pay any of the interest anytime - most lenders allow 10% pre-payments, which is more than enough to cover any interest. Thanks, Mich

[@waynebeck7801]

It would be helpful to see some illustrations showing the compounding interest over the years.

[@ReverseMortgageProsCanada]

@@waynebeck7801 You can watch from about 16:30 in the video where I cover this. I am working on a calculator for my site that can show this too - I'll let you know when it's live! Thanks, Mich

[@waynebeck7801]

Does the age of the home make any difference. We would like to do one on our new home?

[@ReverseMortgageProsCanada]

Good question - no, the age of the home doesn't make a difference. It's all about the value, location and type of home. See this video for a bit more information on what actually does matter for qualifying for a reverse mortgage: kzbin.info/www/bejne/mYGpY3Sve8R9q9E Thanks, Mich

[@waynebeck7801]

Can you withdraw money when ever you want r does the lender set up a withdrawal schedule..as an example let’s say you qualify for 250,000 can you withdraw a lump sum and the rest if and when you need it.

[@ReverseMortgageProsCanada]

You can withdraw money whenever you like. One of the lenders will even give you a bank card to do this. Some of the other lenders have minimum amounts for withdrawals (usually around $1,000). The only thing to be aware of when planning withdrawals is that regular (small) withdrawals are usually on a variable interest rate - where as if you take lump sums you can get them locked in at a fixed interest rate. But - aside from this - generally speaking you're in control of how and when you can withdraw funds. Thanks, Mich

[@judyiocco6086]

Great information

[@ReverseMortgageProsCanada]

Glad you enjoyed it and I appreciate the nice comment. Thanks, Mich

[@ameliaquintana1449]

I am in the United States. Would your information be similar here?

[@ReverseMortgageProsCanada]

Unfortunately not. Reverse mortgages in the USA are totally, totally different to Canada. Not even close to the same in any way, shape or form. See this article where I discuss this a bit more in detail: www.reversemortgagepros.ca/canada-vs-usa/ Thanks, Mich

[@shelleycharlesworth5177]

I am a 76 year old widow- retired- and I own a home free & clear worth $2 million [ maybe even $2.5 million ]. I have excellent credit - no children or debt and I think that I only want a reverse mortgage for $300K. I have pension income from my pension and I get 50% of my late husband’s pension. I do have some savings and some investments totaling about $500k Would a reverse mortgage of $300k be a good idea for me ? I’m in an affluent suburb of San Diego and home prices have increased quite a lot in last 4 years. I know I must keep the home up and pay the property taxes and homeowner’s insurance. I’m still able to do that but rising costs are causing me to worry that my expenses may exceed my income In a few years. I want to stay in my home for now but I want know what I will owe if, say, I decide to move-sell my house in 3 or 4 years. Or say I HAVE to move due to failing health? My health is good for now but one never knows. Will what I owe now be $355,000, $450,000 $ or ?? On a $300,000 loan?

[@ReverseMortgageProsCanada]

Hi There I'd love to help you but all my information relates to Canada and reverse mortgages in Canada. Reverse mortgages in the USA are very, very, very different to those in Canada - I'd talk to a professional there, explain your situation, do your research and inform yourself about how it all works and then make a decision. Best of luck. Thanks, Mich