Reverse mortgages: Is it time for such a scheme in The Bahamas?
Published: Oct 24, 2013
For most Bahamians, the single most important asset they have is their home. And in this time when things are flip-flopping in the economy, there may be some, more than others, battling to find a way to put some extra money in their hands and wishing there was a solution.
I speak directly about older persons who are retired, living off their pension, and who find themselves in a cash-strapped situation through poor financial planning or ill health.
It happens. Aside from that, after one reaches a certain age, insurance companies make it a bit more challenging for one to secure coverage.
There may be a solution to securing some cash if there is need for a loan through one’s home, but that option has not really caught on here as yet. That is reverse mortgages, something you may have seen advertised by U.S. stations.
A reverse mortgage basically is a loan available to persons over the age of 62 years that provides a borrower the option of converting a part of the equity of their home into cash. Of course your home must be paid for.
Reversed mortgages were devised as an avenue to help people in or near retirement, with limited income to use the money they put into their home to pay debts (including traditional mortgages), or cover basic living expenses. In fact, there is no restriction on how the borrower may opt to use the reverse mortgage proceeds.
It is called a reverse mortgage because the traditional mode of payment is reversed. Instead of making monthly payments to the financial institution or lender, the lender makes payments to the borrower.
You pay only when you sell and vacate the property.
Unfortunately, our local banks do not offer this service, despite their branches in Canada doing so. You might be surprised what other services and benefits Canadian clients of these major banks receive, while we don’t.
If this was an option here, I think it would make life much easier for many senior citizens, providing them with funds to assist relatives if the need arises, with university fees or to cover medical expenses.
So, I say to those banks, some of you have been in The Bahamas almost a hundred years and you have made huge profits from our citizens. Yes, I know you provide jobs and assist the community, but you can do more. Provide more services, especially those programs that work well in Canada. Why don’t you consider Bahamianizing these options and give us the same benefits and more access to credit?
• William Wong is president of Wong and Associates Realty. He was also a two-term president of The Bahamas Chamber of Commerce and The Bahamas Real Estate Association. Questions or comments can be emailed to William@wongsrealty.com.