Reverse Mortgage
What is a Reverse Mortgage?
Simply put – a reverse mortgage is a loan secured with your home. The main differences between a traditional mortgage and a reverse mortgage:
Age: you need to be 55 or older to obtain a reverse mortgage (the average age is 73)
Amount: the maximum you can borrow is 55% of your home value, however, this amount may be reduced based on your age (rule of thumb – the older you are the more you can borrow)
Interest rate: the interest rate is typically higher on a reverse mortgage
Income: for a traditional mortgage you need to show proof that you have sufficient income to make your monthly mortgage payments – this is not the case for a reverse mortgage
Payments: you can choose to make interest only payments on your mortgage or make NO PAYMENTS at all (**if you choose to make no payments the interest is added to your loan and paid back when you sell, therefore, decreasing the equity you have in your home)
How do I get a Reverse Mortgage?
There are 2 lenders that provide reverse mortgages in Canada – Equitable Bank and Home Equity Bank. You can arrange the reverse mortgage through a Mortgage Agent (ie. ME!)
Why would I take out a Reverse Mortgage?
While the reverse mortgage is not the right product for everyone (ie. If you have income sufficient to qualify for a traditional mortgage that is your best option), it is a great solution for many home owners looking to take advantage of TAX FREE cash.
- Supplement retirement income
- Home renovations
- Gift funds to children so they can purchase their own homes
- Home improvements to make a home ‘saleable’
- Provide funds for home care and/or accommodations for a spouse who needs to transition to assisted living
The main advantage to the Reverse Mortgage is that it allows you to access TAX FREE equity in your home while allowing you to STAY IN YOUR HOME.
Interested in learning more? Give me a call!
