What is a Reverse Mortgage?
A Reverse Mortgage is a way for you to turn up to 55% of the value of your home into tax-free money provided you are a homeowner of at least 55 years old.
This loan is secured against your property however unlike a conventional mortgage or line of credit, there are no mortgage payments required if you live in your home.
You maintain 100% ownership and control of your home and will never owe more than the value of your home.
Important Note: You are required to keep your property maintained, your home insured, and pay your property taxes.
Reasons for a Reverse Mortgage
- Pay off existing debts (e.g. mortgage, credit card, etc.)
- Increase the standard of living by improving cash-flow
- Renovate your home for long term livability
- Start a business
- Handle unexpected expenses
- Financially assist children or grandchildren
- Estate planning
- Take the trip you have always wanted
How do you qualify?
- Both you and your spouse must be 55 years of age or older
- Your home is your principle residence
- Any loans secured by the home must be less than the money available from the reverse mortgage (e.g. home equity line of credit or existing mortgage) *some additional financing options may be available
What is the process for applying?
We have a brief discussion where I can get to know you and your particular financial situation. I will provide you with all the information you require to make this decision and guide you through the process. Don’t forget I deal with this every day!
Take some time and discuss it with your family. This is a big decision and getting valuable feedback from your immediate family will go a long way. I am here to speak with a family member if you like.
Once you are comfortable with this decision we will submit your proposal to a Lender. The Lender then reviews the proposal and issues a conditional acceptance letter (aka Lender’s Commitment) which outlines their terms and appraiser of choice.
We then request the appraiser to attend your residence for report completion – this will be your only out-of-pocket expense.
Before you make a commitment you will be required to seek out independent legal advice from an independent lawyer or notary. We can assist you with this if you need help locating one in your area.
Once all the paperwork is signed, you receive your tax-free money!
Are there any out of pocket expenses?
Yes, an appraisal of your property is required which we will be ordering on your behalf. Prices vary depending on location and type of property however you can expect to pay between $300 – $450.
There are additional one-time fees to arrange the mortgage, independent legal advice, registration, fee administration, and title insurance. However, these fees can be and are often deducted from the proceeds of the Reverse Mortgage.
Important Takeaways
- Stay in your home longer with confidence
- Gain control of your financial situation and peace of mind
- Optional or NO mortgage payments unless you choose to move or sell
- Tax-free money when you need it
- Spend the money however you wish
Reverse Mortgage Frequently Asked Questions
HomeEquity Bank originally launched their Reverse Mortgage product under the name CHIP which stands for the Canadian Home Income Plan (CHIP)
Currently, there are only two lenders that offer Reverse Mortgages: HomEquity Bank & Equitable Bank. However, Equitable Bank launched its product in January 2018 and as such may not be offered in your particular location.
Unlike a conventional mortgage or line of credit, there are no debt servicing requirements. What this means is your income and credit history are not necessarily considered aside from the fact you need to show that you can keep your property maintained, insured and property taxes paid.
Our advice and service are completely free to you as we get compensated by the Lenders.
The lender does not dictate what you must allocate the money for, meaning you can use the funds for anything you want. The most common purpose is to increase your monthly cash flow by paying off any existing liabilities you may have like a small mortgage or credit card. Another common purpose is renovating your home for long-term livability. Maybe you want to take a holiday, start a new business, help your children or grandchildren, estate planning, the options truly are endless, it’s your tax-free money!
You and your spouse must be at least 55 years old and own your home.
The amount of money you are eligible for depends on your age, age of your spouse, home value, property type, and location.
No, there are no payments required until you either move or sell your home. Voluntary or lump sum payments can be made to reduce interest cost if you choose.
Provided you maintain your property, pay your property taxes and house insurance you will never be asked to leave your home. You remain the owner and have complete control of your home.
The existing mortgage will be paid off first with the proceeds of the reverse mortgage and then you are given the remaining proceeds.
No, a Reverse Mortgage will not affect any government benefits you receive such as OAS (Old Age Security), CPP (Canada Pension Plan), or GIS (Guaranteed Income Supplement)
Yes, income verification and credit score are not requirements for a Reverse Mortgage.
Over 99% of homeowners have equity left once the Reverse Mortgage has been repaid. According to one of our lenders, typically homeowners are left with more than 50% of the value of the home. There are two reasons for this:
- Most homes continue to rise in value
- Lenders apply a conservative limit on the amount you can qualify for (up to 55%)
No. Financial professionals recommend Reverse Mortgages to supplement monthly income as opposed to selling or downsizing.