SnowbirdAlert REVERSE MORTGAGES: pros and cons Lending experts claim that over the past year, there has been a substantial rise in interest in reverse mortgages and the cash injection which they offer. In fact, some say that the market is soaring. The reason, they contend, is that even with a valuable home that’s completely paid for, some are finding that they do not have adequate income to live the lifestyle they want, or to pay for the upkeep of their home. Presumably, they are home-rich and cash-poor. Consequently, the idea of a reverse mortgage can seem like a win-win situation. It’s a way to turn home equity into cash without having to make mortgage payments or sell the house. The homeowner receives payments drawn down from the equity of the house, which can be paid out in a lump sum or other agreed-upon payment structure. If only it were that easy and uncomplicated. Canada’s Office of Consumer Affairs (OCA) stresses that reverse mortgages are complex and binding financial agreements which require careful and thorough examination. This complexity can make it difficult for a person to weigh the option of a reverse mortgage versus other lending alternatives. Moreover, the OCA warns that there can be serious pitfalls. Borrowers, for example, could find themselves in default of their loans if they do not adequately maintain or insure their homes or pay their property taxes. In such cases, the lender might have the right to foreclose on a home and ultimately sell it. The OCA advises that reverse mortgages may make sense for some people, but are totally inappropriate for others. Potential borrowers should understand that the different types of reverse mortgages can have significantly different financial implications. Utmost care must be taken when deciding between a straightforward reverse mortgage, an annuity, a fixed-term loan or a line of credit − making sure that the choice is the right one for an individual’s particular needs and circumstances. Reverse mortgages are available to Canadians who own their own home and are 55 years and older. If an applicant has an existing mortgage on their house, they can still qualify for a reverse mortgage so long as there is adequate equity in the property. However, the existing mortgage must be paid off with the proceeds of the reverse mortgage. The amount a person can borrow is based on several factors, including the borrower’s age and the value of their home. When the borrower decides to move or sell, the loan (plus interest accrued on the loan) is repaid from the proceeds of the sale. To ensure that there is always equity left over, the OCA strongly recommends borrowing conservatively. Reverse mortgages can provide a self-financing solution to some people whose economic and social difficulties might otherwise force them to leave their homes. To make the right choice, the OCA cautions potential borrowers to obtain complete information and to proceed with extreme caution. Things to be considered before taking out a reverse mortgage include alternative lending options and the costs and fees associated with house appraisal, securing the loan, independent legal fees, service charges and annual fees. Costs associated with a reverse mortgage may be higher than a regular mortgage or other lending products. Also, is there a penalty for paying out the loan early and does the contract offer a “cooling off” period during which the borrower can cancel the arrangement without penalty? The OCA says that what matters most of all is being fully informed before signing on the dotted line. More information about reverse mortgages can be found online at: www.ic.gc.ca/officeofconsumeraffairs. Proposed Amendment to Ontario Regulation 552 under the Health Insurance Act Regulation Number(s): Regulation 552 Bill or Act: Health Insurance Act Summary of Proposal: The Ministry of Health and LongTermCare (ministry) is proposing to amend Regulation 552 under the Health Insurance Act (HIA) to end the Ontario Health Insurance Program (OHIP) coverage for emergency services (arising while outside the country) for Ontarians travelling outside of Canada. If approved this change would take effect October 1, 2019. Currently the Out-of-Country Travellers Program provides reimbursement at the following rates for services required to treat conditions that are acute, unexpected, arose outside Canada, and require immediate treatment. For out-of-country inpatient services: • a maximum of $400/day for higher level of care (e.g. Intensive Care Unit, operating room); • a maximum of $200/day for any other level of care; Otherwise: • $50/day for outpatient services; and • $210 for renal dialysis. These reimbursement rates have not increased in over 20 years. With this very limited coverage and the low reimbursement rates (~5% of costs on average) provided by the OOC Travellers Program, OHIP-eligible persons who do not purchase private travel health insurance can be left with catastrophically large bills to pay because of OOC emergency medical care. Ontarians are advised to obtain private travel health insurance before travelling outside of Canada. The proposed revocation of the OOC Travellers Program is consistent with recommendations made by E and Y and by the OAGO. It also aligns with government’s commitment to implement changes to restore accountability and trust in the use of taxpayer dollars and to bring greater modernization, efficiency and transparency to OHIP to benefit both providers and patients. Ontarians who decide to travel outside of Canada may continue to seek the best, most comprehensive coverage from travel insurance companies who already cover 94% of reimbursement for eligible costs related to emergency care services out of country. This proposal does not affect current publicly funded health care coverage for Ontarians travelling in other parts of Canada. In addition, this change will have no impact on 99.5% of Ontarians. OHIP data suggests, of those 40,000 Ontarians who do travel outside of Canada each year and require health services, over 90% obtain private travel health insurance. Source: Ontario’s Regulatory Registry - Government of Ontario 6 | www.snowbirds.org
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