Reverse mortgages

Reverse Mortgages

With mortgage guidelines getting stricter over the past year, it has opened a wave of interest for different types of mortgages – including what’s known as a reverse mortgage. There have been negative connotations about reverse mortgages over the years, so let’s challenge the misconceptions and see if and how a reverse mortgage could benefit you.

What is a reverse mortgage?

Reverse mortgages work exactly as they sound. When you have a reverse mortgage, you are utilizing equity within your property to supplement your income. This can be done in a lump sum payment or through ongoing draws.

Benefits of a reverse mortgage?

For the majority of people, their net worth is tied up in equity. Freeing up some of this capital could allow you to live more freely. With a reverse mortgage, no payments are ever required throughout the life of the mortgage. This allows you to access up to 55% of your home equity and also stay in your home as long as possible. The reverse mortgage will only come due when you sell or no longer reside in the home, at which time the remaining equity would go to your estate.

How does a reverse mortgage not have any payments?

With a reverse mortgage, all accrued interest charges would be tacked onto your mortgage. This would only increase the mortgage to 55% of your home’s value in order to keep value in the home itself for when you sell, as well as to keep value in your home incase prices decrease. If home prices increase, this in turn can unlock more equity from your home.

What do you need to qualify?

To qualify for a reverse mortgage, you and your spouse (if applicable) will have to be over the age of 55 and on the home’s title. Otherwise the only other requirements are having equity in your home to utilize and that the property is your primary residence. If you have a current mortgage or secured Line of Credit (LOC), these would be rolled into the reverse mortgage. If your pension doesn’t cover all the bills each month, and you have equity within your home, a reverse mortgage may be the right product for you.

Lowest Rates in Canada

3 Year Fixed 3.44% 3.39%
5 Year Variable 3.10% 3.45%
5 Year Fixed 3.39% 3.79%

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