Many people do not fully understand what a reverse mortgage is. In fact, the concept is quite simple. A senior homeowner borrows against the equity in his or her home in almost the same fashion as in a conventional home equity financing. Once the reverse mortgage transaction closes, the borrower never has to make any interest or amortized principal payments to the lender.
Of course, it is quite wrong to think that the homeowner never pays interest or does not repay the principal borrowed. In actual fact, the borrower has to pay back the principal and interest borrowed, but in a reverse mortgage all such payments are deferred – in effect, capitalized into a lump-sum payment due when the borrower dies or sells the property.
In return for never having to make any mortgage payments in his or her lifetime, the borrower pays for a rapidly growing mortgage debt and a drain of his/her remaining home equity. This is in contrast with a conventional mortgage where the owner must make monthly mortgage payments of principal and interest, but knows that his or her mortgage debt will never grow.
Reverse mortgages are typically marketed to senior borrowers – the last time we looked, in Canada, the minimum age for a reverse mortgage was around 55 years old.
With conventional mortgage lending, a 75 per cent loan-to-value ratio is common. In contrast with reverse mortgages, the homeowner can only borrow up to 50 percent of the value of the property. This extra “equity buffer” gives the reverse mortgage lender some comfort that there will be enough equity left over to pay off the accrued interest and principal when the homeowner finally dies or sells.
Some advisors criticize reverse mortgages on the grounds that reverse mortgages can end up by luring seniors into rash borrowing decisions with the appeal of “no payments ever” only to see them left with small loan proceeds, depleting home equity, and an overall higher net cost of borrowing.
Despite this, demand for reverse mortgages continues to grow. Before entering into such a transaction, as a safeguard, it is only prudent to have your family lawyer give you advice on the proposed transaction beforesigning up. As always, CAVEAT EMPTOR (let the buyer beware) is the best policy.
Many people do not fully understand what a reverse mortgage is. In fact, the concept is quite simple. A senior homeowner borrows against the equity in his or her home in almost the same fashion as in a conventional home equity financing. Once the reverse mortgage transaction closes, the borrower never has to make any interest or amortized principal payments to the lender.
Of course, it is quite wrong to think that the homeowner never pays interest or does not repay the principal borrowed. In actual fact, the borrower has to pay back the principal and interest borrowed, but in a reverse mortgage all such payments are deferred – in effect, capitalized into a lump-sum payment due when the borrower dies or sells the property.
In return for never having to make any mortgage payments in his or her lifetime, the borrower pays for a rapidly growing mortgage debt and a drain of his/her remaining home equity. This is in contrast with a conventional mortgage where the owner must make monthly mortgage payments of principal and interest, but knows that his or her mortgage debt will never grow.
Reverse mortgages are typically marketed to senior borrowers – the last time we looked, in Canada, the minimum age for a reverse mortgage was around 55 years old.
With conventional mortgage lending, a 75 per cent loan-to-value ratio is common. In contrast with reverse mortgages, the homeowner can only borrow up to 50 percent of the value of the property. This extra “equity buffer” gives the reverse mortgage lender some comfort that there will be enough equity left over to pay off the accrued interest and principal when the homeowner finally dies or sells.
Some advisors criticize reverse mortgages on the grounds that reverse mortgages can end up by luring seniors into rash borrowing decisions with the appeal of “no payments ever” only to see them left with small loan proceeds, depleting home equity, and an overall higher net cost of borrowing.
Despite this, demand for reverse mortgages continues to grow. Before entering into such a transaction, as a safeguard, it is only prudent to have your family lawyer give you advice on the proposed transaction beforesigning up. As always, CAVEAT EMPTOR (let the buyer beware) is the best policy.
DioGuardi offers solutions for tax problems such as:
Unreported income
Unfiled tax returns
Payment arrangements
Unpayable tax debt
Tax dispute litigation
Criminal tax defense
Wills, Estates & Trusts
DioGuardi Law offers these will, estate and trust services for individuals and business-owners:
Wills
Preparation of trust agreements
Powers of attorney
Estate administration
Probate
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DioGuardi Law can assist you with all your real estate needs including:
Newly constructed/Resale
Purchases and Sales
Title transfers
Leases
Private mortgages
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Condominiums
Vacant land
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When your tax balance is too large to be affordable, DioGuardi Law can protect your home, your cash flow and your financial assets from the Taxman. It is essential that we begin planning a strategy before the CRA registers a lien against your properties or seizes financial accounts, and before you engage with an insolvency trustee.
Business & Tax Planning
DioGuardi Law has the experience to provide:
Resident and non-resident corporate restructuring
Optimum use of holding corporations
Continuity and succession planning
Tax-free transfers
Losses and ABIL planning
Making interest tax deductible
Small business planning
Corporate & Commercial Law
DioGuardi Law have represented business clients for the last 50 plus years and have supported their legal requirements on an on-going basis by offering the following services:
Incorporations and corporate governance
Corporate reorganizations and transactions for the directors and shareholders
Negotiation and drafting of agreements, professional corporations, minute book maintenance
Brigitte DioGuardi
B.A., LL.B
Brigitte obtained her Law Degree from the University of Sheffield in the United Kingdom. Upon her return, she qualified for the Bar and was called to the Law Society of Ontario (formerly the Law Society of Upper Canada) in 2002. She was also a member of the Bar of British Columbia and headed up the Vancouver office of DioGuardi Tax Law. Fluently bilingual in English and French, Brigitte has broad experience in the areas of:
Joyce Bruno has worked as executive legal assistant to Paul Dioguardi for 35 years and continues to offer her expertise and experience to the Dioguardi Law firm. Joyce’s role has evolved over the years and has acquired and developed many skills. She is an invaluable asset in case management and ensures the smooth running of our office.
Paul DioGuardi
B.A., LL.B, KING’S COUNSEL, SENIOR COUNSEL
Paul obtained his Law Degree from Queen’s University in 1964. He is a member of the Bars of Ontario, British Columbia and the Turks and Caicos Islands, a British tax free territory in the West Indies. He has over 50 years of experience and was trained at the Ottawa head offices of Revenue Canada and the Tax Litigation Section at the Department of Justice. Paul has had and continues with an extensive career in various areas of law such as:
