A reverse mortgage is intentionally designed to allow Canadian homeowners 55 or older to retire comfortably in their own home with tax free money. Unlike traditional mortgages, there are no mortgage payments for as long as you live in your home. You can access up to 55% of the value of your home and are qualified based on your age and property, as opposed to your credit and income. To be eligible, you must live in your home and simply pay your property taxes and insurance. You will always maintain both ownership and control of your property.
Access up to 55% of the appraised value of your home tax-free. Get rid of monthly mortgage payments and instalments. Retain full control and ownership of your home. Stay in the home and neighbourhood you love. Get approved based on your age and property, not on credit and income. Make advance interest payments if desired. Increase your cashflow.
Travel. Renovate, purchase or refinance your existing home. Pay for medical expenses or home care. Buy a car. Pay off your debts. Buy a vacation property. Supplement your retirement income. Help your children with a down payment on a home.
A reverse mortgage is a great tool that provides Canadians with the retirement lifestyle that they want! Here are a few of the most common questions.
Question: Is it possible to lose my home?
Answer: No, you are the owner of your home. You will never be asked to move or sell as long as your property taxes and insurance are in good standing, you live your home and the property is kept in good condition.
Question: Do I have to make mortgage payments?
Answer: Nope! There are no payments required until you choose to move or sell your home. However, you do have the option to make advance interest payments to reduce the future principal.
Question: How much money can I borrow?
Answer: The maximum amount depends on the age of the youngest applicant, the value of your home, and the type/location of your property.
Question: Will any of my government benefits be impacted?
Answer: No, reverse mortgages do not affect any government benefits, such as Old Age Security (OAS), Canada Pension Plan (CPP), or Guaranteed Income Supplement (GIS).
Question: What if I already have a mortgage
Answer: That’s fine. Your reverse mortgage will pay out your traditional mortgage and any other secured debt. You’ll get the balance of the proceeds, payment and tax free.
Question: What about downsizing instead?
Answer: Downsizing is always an option depending on your goals. Make sure to factor in potential renovations, commissions, legal fees and land transfer taxes. Due to affordability, you’ll often have to move away from the neighbourhood you love in order to preserve some money to live. Reverse mortgages were designed to keep you in your community and take advantage of further appreciation of your home.
Question: Do I get the equity left in the home?
Answer: Yes, the home equity is all yours. In fact, over 99% of homeowners with reverse mortgages have money left over after the mortgage is repaid. On average, the amount left is more than 50% of the value of the home. Remember, the absolute maximum amount a bank will lend on this program is 55% of the appraised value of the property. Reverse mortgages are inherently conservative to protect all parties interests.
Question: Is a reverse mortgage similar to a home equity line of credit (HELOC)?
Answer: No, with a HELOC you have to qualify for the loan based on income and credit. It’s better suited for those with short term borrowing needs and an ability to make monthly payments. A HELOC is also callable at the bank’s discretion. Reverse mortgage qualification does not rely on income/credit, is a lifetime product, and is not callable. It also does not require a mortgage payment.
There are lots of misconceptions about reverse mortgages. With an aging demographic in Canada, this type of mortgage has evolved as both a needs-based product as well as a tool for those looking to preserve retirement savings and investments. Here are some common myths and facts.
Myth: You can not get a reverse mortgage if you already have a traditional mortgage
Fact: As long as you don’t exceed the maximum Loan-To-Value (LTV) permitted through the reverse mortgage program, we will pay out your existing mortgage/debts from the proceeds of the reverse mortgage.
Myth: Reverse mortgages are a solution of last resort
Fact: Many financial professionals condone them because they provide financial flexibility and protect other investments. Retirement savings go further because reverse mortgages provide tax-free money.
Myth: Surviving spouses are stuck paying the loan
Fact: Surviving spouses have the option to stay in the home without any mortgage payments until such a time if/when they decide to sell the property.
Myth: The bank owns your home
Fact: You will always retain title, ownership and control of your home and can decide what to do with the property (i.e., sell, renovate, etc.).
Myth: Reverse mortgage rates are too high
Fact: The rates you’ll pay are nominally higher than regular mortgage rates as it is a different product requiring no income qualification and no payments to be made.
Myth: You will owe more than your home is worth
Fact: The maximum you can borrow is 55% of the equity in your home. Reverse mortgages are designed to be conservative to protect you, your equity, your estate and the bank.
Myth: You can be forced to sell or foreclose at any point at the bank’s discretion
Fact: Reverse mortgages are lifetime products. As long as you pay the property taxes and home insurance, live in the home, and keep the property in good condition the property remains in good condition, your loan won’t be called even if the property value drops. Accordingly, you can stay in your home indefinitely.
Myth: A Home Equity Line of Credit (HELOC) is better
Fact: HELOCs are a great option for those with short term borrowing needs and the ability to pay the monthly interest payments. However, they are callable products, meaning the bank can demand the loan be repaid at any point in time. Similarly, they are not guaranteed on renewal. Conversely, reverse mortgages are long term products that will not be called in the event of property depreciation or rising interest rates. Moreover, the tax-free distribution and no payment feature enables you to prolong other retirement savings.