Reverse Mortgage

If you’re over the age of 55 and looking to leverage the equity you’ve built in your home, a reverse mortgage might be right for you. This is considered a safe option for Canadian homeowners to access tax-free cash.

Many Canadians consider this option for home improvement projects, health care expenses, or paying off debt. The choice is yours as to how you spend the money while you maintain ownership of your home without monthly payments. Repayment is not required until you move, the home is sold or the last of the borrowers has passed away.

Why Choose A Reverse Mortgage?

As you move towards retirement, the assets you have accumulated typically fall into the categories of savings and home equity. Your home has probably appreciated in value over the time you’ve lived there and contributes a good portion of your net worth. However, until you sell your house, you can’t access that money.
Well, that might not always be true. With a reverse mortgage, you can access up to 55% of your home’s current value without selling it. This type of loan is sometimes called an “equity release” as it gives you access to equity you have built up and otherwise can’t tap into.
You can acquire the money as a lump sum, as payments or a combination of the two. This tax-free cash will not impact your old-age security or guaranteed income supplement. It can be used as you desire without monthly payments.
Unlike a home equity line of credit, a reverse mortgage does not require proof of income and is specifically designed for home owners 55 years and older. Repayment is not required until the loan is due (when you move, sell the house or pass away). However, the longer you go without making payments, the more interest you will owe so you will need to consider all of the factors when choosing a reverse mortgage.

How Can I Get The Best Rates?

There are currently only two financial institutions in Canada that offer reverse mortgages so the rates are very comparable. Because the risk of the loan is higher and the lender must wait for repayment, the interest rate for a reverse mortgage is typically higher.

Your broker will be able to best navigate interest rates, fees, etc. for your particular situation. If a reverse mortgage seems like the best option for you, book a consultation for more information. We can review your goals and situation to determine if a reverse mortgage is the right option.

Things To Consider

If your credit score is less than ideal, there are a few things to consider. You’ll need to pay off any loans or lines of credit that are secured by your home. This could include a mortgage or a home equity line of credit. You can use the funds from the reverse mortgage to do this.

When completing your application, the lender will want to know your age and the age of anyone listed on the deed of your home, where you live and the value and condition of your home. Your home must be valued at a minimum of $200,000 and you will still be responsible for maintaining the home in addition to paying property taxes.

You’ll also want to consider how a reverse mortgage might impact your estate and the inheritance you will leave to your family. If you pass away, the loan will need to be repaid with interest within a limited period of time. Your broker can help you with these calculations and determine the best option for your particular circumstances.

Should I Use a Broker?

Navigating reverse mortgages can be complex and confusing. A mortgage broker is familiar with the terms and conditions and can help you determine if this is the right fit for you. They will do the leg work and help you compare the alternatives to decide which option is best for you. A broker will ensure you understand how a reverse mortgage works and how it can affect your home equity over time. They will assist you in determining your goals for your estate and family after you’re gone and how to best plan for your desired outcome.

A broker might suggest getting a different type of loan or line of credit, selling your home and buying a smaller house, renting or moving into assisted living. Each situation is unique and your broker will help you determine if a reverse mortgage is right for you.

If you’re 55+ and looking for a way to tap into the equity you have in your home, a reverse mortgage might be your answer. Consider your options and book a consultation with me to discuss further.

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Reverse Mortgage