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What is a Reverse Mortgage

For many Canadian seniors, residing at home is very important. Cashflow can be a concern for seniors as often income will decrease as you age. Sometimes the only solution is to sell the home. A Reverse Mortgage is a great solution for many seniors to consider that allows Canadians of retirement age to reside in the home, while accessing home equity funds. This is a mortgage product available that is set-up the exact opposite of a regular mortgage. With a Reverse Mortgage, the lender will advance you funds in exchange for a portion of your home equity. Therefore, over time the balance owing on the property will increase instead of decreasing.

Reverse Mortgage FAQs

What are the advantages of getting a Reverse Mortgage?

There are advantages to consider when receiving this type of mortgage financing:

  • No requirement of regular payments on the loan. You could choose to pay zero per month
  • Ability to receive cash from the value of your home without the need for a sale
  • Easy to qualify as Reverse Mortgages do not require health or income information
  • Receiving money from this type of mortgage does not reduce your eligibility for Old-Age Security or Guaranteed Income Supplement benefits
  • Funds received are tax free
  • If your property increases in value, you will still receive the benefit of this higher value should you decide to sell

Disadvantages to consider are:

  • Interest rates are much higher than residential rates
  • As you borrow more funds interest also accumulates faster, therefore, reducing your equity quickly
  • There are initial costs associated with receiving a Reverse Mortgage
  • If you were to pass away, your estate is responsible for payment in full of the funds received including the accrued interest. This could result in a small amount of funds left to the estate
  • Although you are reducing the amount of your home equity, you retain ownership therefore are responsible for maintenance, taxes and insurance costs
Who can be approved for a Reverse Mortgage?

In order to be eligible for a Reverse Mortgage you must be a Canadian homeowner and be age 55 or older.

Is there a minimum amount I can receive from a Reverse Mortgage?

The minimum advance amount is $25,000

How do I receive my Reverse Mortgage funds?

The funds are provided to you either as a one-time lump sum or can be paid over a pre-determined amount of time

What is the interest rate charged on a Reverse Mortgage?

The interest rate charged is higher than a regular residential mortgage. Ask your mortgage broker for update on current rates available.

Am I able to secure a Reverse Mortgage with any type of property in Canada?

For this type of mortgage financing, the property must be your primary residence. (normally this means you have lived in the home for at least six months)

Do all lenders offer Reverse Mortgages to seniors?

There are two lenders in Canada that provide Reverse Mortgages: HomeEquity Bank and Equitable Bank.

How do I qualify for a Reverse Mortgage?

Lenders will generally consider the following when approving a Reverse Mortgage:

  • Your age (and age of your spouse if they are also registered on the title of the home)
  • Appraised value of the property and location
  • The equity position you have currently. 55% of the value of your home may be provided to you from a Reverse Mortgage
Will the lenders need to confirm my current income to qualify for this type of mortgage?

Lenders will consider property value and equity position to qualify you for this mortgage. Your income is not an important consideration.

Are there legal and other costs involved to receive funds from a Reverse Mortgage?

Yes, initial costs include, application fee, appraisal fee, and lawyer charges.