What Is A Reverse Mortgage?
For Canadian Seniors aged 55 and over, a Reverse Mortgage is an innovative form of financing that allows them to tap into 55% of their home value in tax-free cash, all while still occupying the property. There is no monthly payment obligation like in a traditional mortgage. The loan plus interest will only need to be repaid when the homeowner sells the house, moves out of the house permanently, or dies.
Features and Benefits of Reverse Mortgage
The Canadian Reverse Mortgage product offers many features that are helpful for the elderly citizens who want ease and financial freedom.
1. Tax-Free Money
The funds that are given to you as payment will not be recognized as income, hence you will not lose your Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits.
2. No Monthly Payments
One of the most appealing aspects is the removal of monthly mortgage payments. This allows you to stay in your home without having to worry about payments. However, the interest keeps adding to your principal in this case. You may choose to pay monthly interest too if you can afford those payments. The lenders are flexible when it comes to the way of paying it back.
3. Flexible Payout Options
Pick how you would like the payment to be issued:
– In full
– Periodically (Bi-Weekly, Monthly, Quarterly)
– A mixture of both
4. Maintain Home Ownership
You will keep full ownership of your house and can continue living there whenever you want for as long as you wish.
Traditional Mortgages vs. Reverse Mortgages
Here’s a fast overview:
| Feature | Traditional Mortgage | Reverse Mortgage |
|---|---|---|
| Age Requirement | None | 55 years and older |
| Monthly Payments | Mandatory | Not mandatory |
| Access to Equity | Restricted | 55% of home value |
| Loan Repayment | Continuously | Sale/move/death |
| Ownership Retention | Yes | Yes |
| Income Requirement | Essential | Slight or none |
There is greater appeal to Reverse Mortgages for retirees who have a more Equity in the home and low income.
Eligibility Criteria of Reverse Mortgage
In Canada, you must fulfill the following to be eligible for a Reverse Mortgage.
– Canadian Citizen and 55+ years old
– Possess the property without a mortgage or have low mortgage
– The house needs to be your primary home
– The house must meet the property standards of the lender.
– Married couples applying together must both satisfy the age requirement.
What Can Canadians Do to Benefit From Reverse Mortgage?
Canadian citizens can resort to Reverse Mortgage for various purposes like:
1. Supplement Retirement Incomes:
Acts as a financial buffer for covering daily expenses or medical bills.
2. Clearing Off The Debt
Seniors claim these funds to pay off credit card debt or loans.
3. Avoid Moving into Smaller Homes
Remain in the your house without the stress of relocating.
4. Expand the Comfort of the Home
Enhance your property in preparation of get older for comfort or better accessibility.
Rationale For and Against Reverse Mortgage
Let us analyze the most important advantages and why some people may frown upon it.
Advantages
No monthly payment
Money received is not taxable
Funds can be put to many different uses
Title of the home remain with the Owners
Ownership of the home will still be retained
No effect on benefits received from the government
Disadvantages
Reduced equity in the house as time goes by
Some of the expenses are connection, appraisal, and other cost
May reduce value of what would be passed on after death
Always consult with professionals like Done Mortgage to understand if it works with your budget.
Best Process to Acquire Reverse Mortgages
When you work with the right team, the process becomes a lot easier in Canada.
Simple Steps:
Talk to a Mortgage Broker – Make an appointment with Done Mortgages for a free consultation.
Get a Property Valuation – A property value appraisal would be needed for example in the current market they have.
Application submission – Submit an Identification document and proof of ownership for the home.
Get paid – Lump sum or regular payments can be selected.
Work alongside a trusted broker to get exceptional rates from lenders like HomeEquity Bank and Equitable Bank.
An Overview of Reverse Mortgages in Canada:
1. Will I lose my home with a Reverse Mortgage?
Not at all. You still retain full legal ownership.
2. Are funds from a Reverse Mortgage taxable?
No. There are no taxes associated with the funds.
3. What is the maximum amount I can borrow with a Reverse Mortgage?
Up to fifty-five percent (55%) of the appraised home value.
4. When is the loan expected to be repaid?
Upon sale of the house, relocating, or death.
5. Is it possible to repay the loan before the due date?
Yes, but you may incur early repayment penalties.
6. Does my spouse have to apply as well?
Required for joint owners. Both must be at least fifty-five (55) years old.
Conclusion: is a Reverse Mortgage the best option for you?
If you are a senior homeowner looking to age in place and access funds, a Reverse Mortgage in Canada may be an appealing option. It’s not for everyone, though. The expertise is the correct approach, and these are the professionals we’d like to advise you with. With Done Mortgage, we’ll be ready to assist you for every part of the process.
