Mortgage Agent based in London and Windsor, Ontario
A mortgage product for homeowners who were mortgage-free but who want to borrow money against the value of their home. Commonly used by seniors, no repayment is required until the home is either sold or the homeowner dies.
Cashflow is a big concern for many older Canadians as they age and their income sources decline. For many, home equity represents their largest asset, and it plays a critical role in retirement planning, especially for those that were not able to take full advantage of an RRSP. Generally, the easiest way for seniors to unlock their home equity is to either sell the property or apply for a home equity line of credit (HELOC). If those options do not make sense, retirement can be a financial struggle.
There is an option, however, that is sometimes overlooked. A Reverse Mortgage, a product specifically designed for Canadian retirees, is another way retirees can stay in their homes while accessing their property’s equity.
A Reverse Mortgage is a loan that allows a homeowner to convert some of the equity in their house into cash without having to sell their home. With a reverse mortgage, instead of being required to make monthly payments, the homeowner actually receives cash from the lender.
The loan will need to be repaid when the borrower moves out of their home, sells the home, or when the last borrower dies. Because a Reverse Mortgage reduces the equity you have in your home, it is sometimes called “equity release”. However, your Reverse Mortgage provider does not actually take an ownership share in your home, as is sometimes assumed.
One of the key features of a Reverse Mortgage over alternatives like a Second Mortgage or a HELOC is that a Reverse Mortgage does not require you to have an income to qualify.
Typically, as long as you are over 55 years old and have equity in a home that’s worth something, you will be approved for a reverse mortgage. Naturally, the older you are and the more home equity you have when you apply for the Reverse Mortgage, the more money you could get.
The full outstanding balance of a Reverse Mortgage is required to be paid when the reverse mortgage comes due. The loan is due:
- When the home is sold (this is the most common outcome),
- When the last borrower no longer resides in the property (for a period of at least 6 months),
- When the last borrower dies,
- When property taxes stop being paid, or
- When condo fees stop being paid.
A Reverse Mortgage for Canadians 55+ can help:
- Pay off debts
- Handle unexpected expenses
- Help children or grandchildren
- Improve day-to-day standard of living
- Make a special trip or purchase