A Reverse Mortgage, Is it Worth it? Retirement financing options for seniors

A picture of a house to denote that you can have a reverse mortgage in you own your home.

A reverse mortgage, is it worth it? It is an interesting question. Reverse mortgages are definitely on the rise. There are now many commercials airing on TV stating the merits of getting one. But what is a reverse mortgage? Who is eligible? What are the pros and cons? Is it worth it?

What is a Reverse Mortgage?

Here’s a definition from the government of Canada website, “A reverse mortgage is a loan that allows you to get money from your home equity without having to sell your home. You may be able to borrow up to a certain percentage of the current value of your home. The maximum amount you will be able to borrow will depend on your age, your home’s appraised value and your lender.

You don’t need to make any payments on a reverse mortgage until the loan is due. This is usually when you move out of your home, sell it or the last borrower dies. You will owe more interest on a reverse mortgage the longer you go without making payments. This may result in you having less equity in your home.”

Who is Eligible?

The government of Canada website says that you have to be at least 55 years old, a homeowner, it has to be your primary residence. Also, if you have a mortgage or lien on your home, you have to pay it off when you get a reverse mortgage.

What are the Pros and Cons?

Here’s some details from Government of Canada website:

Pros

  • You don’t have to make any regular loan payments
  • A person may turn some of the value of your home into cash, without having to sell it
  • You don’t have to pay tax on the money you borrow
  • This money does not affect the Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting
  • You still own your home
  • You may have options as to when and how you receive the money

Cons

  • Interest rates are higher than most other types of mortgages
  • The equity you hold in your home may go down as the interest on your loan adds up throughout the years
  • Your estate will have to repay the loan and interest in full within a set period of time when you die
  • The time needed to settle an estate may be longer than the time allowed to repay a reverse mortgage
  • There may be less money in your estate to leave to your children or other beneficiaries
  • Costs associated with a reverse mortgage may be higher than a regular mortgage or other lending products

Some Caution about Reverse Mortgages

As mentioned above, a reverse mortgage is a loan and with a loan there are conditions that have to be meant and this is where caution is needed. For example you required to keep up the value of the home by maintaining it. However, as you get older this could be harder to do and if your place fall into disrepair you could default on your loan and potentially lose your home. A similar scenario can happen if you do not pay your property taxes and home insurance.

Is it Worth it?

It depends. If you plan to stay in your home right up until you die and you have no beneficiaries to your estate then the reverse mortgage might be to your liking. But if you have beneficiaries you want to give money to after you die, or you plan to downsize or go into assisted living, then it might not be for you. So do your due diligence and do your research. Because a reverse mortgage is not free money but a loan that has conditions like other loans. So you need to be mindful.

You might also like: Should I open a TFSA?

Can I Apply For EI if I Get Fired?

A picture to denote someone applying for EI benefits to highlight the question of can I apply for EI benefits if I get fired.

Can I apply for EI if I get fired from my job? There has been a lot of misunderstanding when it comes to this question. Many people think that if they do get fired from their job that they cannot get EI benefits. Some employers even pressure their employees to quit stating that it is better that you quit then get fired. As a result many people assume that they cannot get EI benefits and do not apply. But is this true?

Can I Apply for EI if I Get Fired? Of Course You Can

Anybody can apply for EI regardless of the reason you stopped working. The key is that you are no longer working or their is work stoppage of at least seven days. If you have that, then you can apply. But the real issue is that can someone get approved for EI benefits if they have been fired?

Can I Collect EI Benefits if I Have Been Fired? Sometimes Yes

A little known fact that many people do not know is that if the employer fires you and puts dismissal on your record of employment, the onus is on the employer to prove misconduct by the Employer. What is misconduct? The Employment Insurance Digest gives a detailed explanation of this term. However, in simple terms it is unlawful conduct. And this conduct by the employee was willful and of evil intent. So you can see, misconduct is serious or even unlawful actions carried out by the employee that result in his/her dismissal.

For example, if the employer put dismissal on an employee’s record of employment and stated the reason as theft. The EI Benefits Officer will call the employer and ask questions such as “what proof do you have that the employee stole? Do you have evidence such as a video? Did you file a police report?” And so on. As mentioned it is up to the employer to prove misconduct, not the claimant filing for EI.

This is because if the evidence between the employer and claimant is equal, the benefit of the doubt will go to the claimant. Here’s an excerpt from The Employment Insurance Digest which says: “The EI Act (ss49(2)) is very clear on the action to be taken if there is an issue of disqualification and the evidence presented by the claimant and by the employer are equally balanced: the benefit of the doubt is given to the claimant.”

As a result, a person can be approved for EI benefits if though they were fired because the employer has to prove that misconduct was involved.

Conclusion

If you have been fired or dismissed from your job, you definitely should apply for EI benefits. The reason is that the employer has to prove that their was misconduct to warrant a dismissal. If it comes done to a he said she said scenario, the benefit of the doubt will go to the person applying for benefits. So if you are ever in a situation where your employer says if you have the choice to quit or be fired. If you haven’t done anything unlawful, then it is better to take option 2, especially if you need to apply for EI.