Monopoly and the Reverse Mortgage – Game On!
The popular board game Monopoly has been around since 1935. Everyone has heard of it, most of us have played it. As per the recommended age level from the makers of the game, children as young as 8 years old have been learning the game of building wealth through property for generations. And to refresh your memory for those of you who haven’t played the board game in a while, a player is able to mortgage his or her property to receive a lump sum from the bank. But this is not a normal mortgage, this is actually a reverse mortgage. Yes, the board game Monopoly popularized the reverse mortgage 26 years before the first real world reverse mortgage was created in 1961.
Real world reverse mortgages are not much different than the time-honored game of monopoly:
- The amount of money that you raise in Monopoly for mortgaging a property is 50% of the property value. In the real world, the amount of money that you are eligible for with a reverse mortgage is up to 55% of the value of the home.
- The amount of money you receive for mortgaging your property in Monopoly is tax-free. In the real world, the money you receive from a reverse mortgage is tax-free.
- No interest is paid on the mortgaged property in Monopoly and no payments are made on the mortgage until the mortgage is terminated. Real life is no different. Termination of the reverse mortgage occurs when the property is sold or six months after the property transfers to the borrowers’ estate.
- In both cases, when you mortgage the property, you retain possession of it.
- Monopoly is not concerned with how much income you collect as you pass GO nor how much rental income you earn on other properties when taking out funds from your property. Reverse mortgages are primarily based on the equity of your home rather than your income.
- You can use the money any way you choose, in the board game Monopoly and in the game of life. The money can be used to cover expenses, payoff other debts, or retain or buy property.
For almost a century, children have experienced the value of a reverse mortgage and how to use them to their advantage in the game of Monopoly. I hope we haven’t been teaching our children a bad lesson all these years! Of course not. Children have been taught the fundamental principle of leveraging property to achieve an objective. If you would like to learn more about real world reverse mortgages, how they work, when it’s appropriate to use one, and get clarity on the myths and facts of reverse mortgages, contact me or your local Dominion Lending Centre broker for further information and sage advice.