Reverse Mortgages

Reverse Mortgage in Canada is a very viable and attractive option for seniors who wish to access the equity in their home without the burden of maintaining mortgage payments.  There is a lot of misunderstood information about Reverse Mortgages and this section is designed to educate you about Reverse Mortgage such that you can make a very well informed decision as to whether a Reverse Mortgage is right for you.

What is a Reverse Mortgage?

A Reverse Mortgage is a mortgage where the lender advances the home owner a lump sum of funds (funds can also be advanced in stages) as an advance against the equity of the home.  Unlike a conventional mortgage which requires regular monthly to pay down the principle, a Reverse Mortgages does not require monthly payments.  As a result, the accrued interest is added to the loan balance, and is paid out when the homeowner dies, sells the home or permanently moves out.

Differences between a Reverse Mortgage and a conventional mortgage in Canada:

Reverse Mortgages can be differentiated to a conventional mortgage by the following:

1. Reverse Mortgage is only available to seniors aged 55 years or older

Both applicants must be 55 years or older to apply and qualify for a Reverse Mortgage whereas there are no such specific guidelines for a regular mortgage

2. Reverse Mortgage does not require monthly repayments to pay back the mortgage

A conventional mortgage is a registered mortgage on a home and requires regular payments (weekly, bi-weekly, semi-monthly or monthly) to pay down the principal amount of the mortgage.  A Reverse Mortgage, however, does not require any repayment while the homeowners continue living in the house.  The mortgage (plus interest) is paid back when the homeowner dies, sells the home, or permanently moves out.  This means that a senior can carry a Reverse Mortgage for 10, 20 or more years without ever making a required mortgage payment!

3. Reverse Mortgage does not require credit checks and income verification to qualify

A conventional mortgage requires both a credit check and income verification to qualify.  A Reverse Mortgage, however, is almost fully dependent on the value of the home and the applicant’s age.

 4. Reverse Mortgage in Canada would NEVER be foreclosed

If a conventional mortgage goes into default, the homeowner can be at risk of foreclosure and eventually losing the home. Because a Reverse Mortgage does not require regular mortgage payments, the home can never be foreclosed as long as the homeowner is living in the home. Regardless of what your home will be worth in the future due to market fluctuations, the Reverse Mortgage lender guarantees that the loan balance will not exceed the fair market value of the home. This means that you won’t ever owe the lender more than the value of the home.

If you want to discuss what a reverse mortgage could look like for you, contact us using the form below!

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