With the surging popularity of reverse mortgages, it’s important to remember that they can be valuable tools, but only if other lower-cost options are exhausted first.
Why? Because most reverse mortgages rates start at around 6.59%, well above the average 3.47% rate for a standard mortgage.
This brings us to a discussion on Home Equity Lines of Credit, or HELOCs.
As Seniors Equity founder Rob McLister explains in his recent Globe and Mail column, for those who can qualify for one, HELOCs can be an effective—and cheaper—alternative to a reverse mortgage.
Most HELOCs are available in the 3.95% to 4.45% range (depending on the borrower’s qualifications and HELOC size). They come in many different forms with varying features.
The key is that some are more senior-friendly than others. For that reason, it’s important to be familiar with the terms of the particular HELOC you’re considering.
As highlighted in the column, Manulife offers one of the country’s most seniors-friendly HELOCs. That’s due in part to its interest-only payment option, which can be drawn from the HELOC itself
And should you ever run out of borrowing capacity, in a worst-case scenario you can typically refinance your HELOC into a reverse mortgage.
As always, we recommend consulting with a qualified mortgage advisor who can walk you through your options and help you determine which products are best-suited to you.