When most of us dream of retirement, we imagine ourselves in our homes – sharing a meal with family or just relaxing in a comfortable spot.
But retirement can also bring financial strain. Seniors often face the challenge of managing with less cash flow than they anticipated or coping with unforeseen expenses.
Unlock financial peace of mind and the freedom to do what matters most with a reverse mortgage!
What is a reverse mortgage?
Much of your net worth may be tied up in your home and a reverse mortgage may be able to help you turn that equity into tax-free cash, requiring no monthly repayments. A reverse mortgage is a secured loan against the appraised value of your home, designed for Canadian Retirees OR Homeowners aged 55 years +, that allows access up to 55% of the equity of the home. You can do this while staying in your home and not having to pay back the loan, until you choose to move, sell or until the last surviving homeowner passes.
You will never be forced to move or sell your home, even if your income or home value changes. You just need to maintain your property and pay the taxes and insurance.
The amount you qualify for will depend on factors such as your age, the appraised value of your home, its location, and the type of home.
What are the benefits of a reverse mortgage?
- Continue living in the house that you love while maintaining ownership.
- May be much easier to qualify for a reverse mortgage than procuring a regular mortgage from a conventional bank.
- Maintain a quality and comfortable lifestyle while retired, when cash flow and income is limited.
- Access to tax-free cash without having to sell, downsize or make ends meet to cover the cost of living and medical expenses, consolidating debt, and home renovations.
- No ongoing mortgage payments required until you chose to sell, move or the last homeowner passes away.
- No-negative equity guarantee (never owe more than the fair market value of your home – subject to lender guidelines, rules, and policies).
What are the dis-advantages of a reverse mortgage?
- Costs involved in procuring and registering a reverse mortgage (set up, appraisal, legal, ILA, title, registration etc.) similar to procuring a regular mortgage from a conventional or alternate lender.
- Pre-payment penalties similar to regular mortgage from a conventional bank.
- Interest rate slightly higher than regular mortgage rate from a conventional bank but similar to alternate lending rates.
- The home’s equity may decrease as the interest increases throughout the life of the mortgage.
Speak to your mortgage broker today to find out whether a reverse mortgage is the right option for you. Call 416-409-5733 today for a free, no obligation review.
Options for living life your way – where you have always lived!
What are the most popular uses of funds obtained from a reverse mortgage?
- Increase retirement cash flow
- Pay off mortgage and other debts
- Manage the rising cost of living
- Cover unexpected and emergency costs
- Gift money to family members and relatives
- Purchase another property
- Renovate or refurbish your home
- Cover health and medical expenses, including home care
- Travel more often to enjoy that much needed vacation
- Live your dreamed and desired retirement
- Stay in the home that you love without having to move or downsize
- Access equity in the home to help in retirement planning
Helping you stay in the home you love with a reverse mortgage!
Frequently Asked Questions
Will I continue to own my home?
Absolutely! Ownership of your home is not transferred to the bank when you receive a reverse mortgage. A reverse mortgage is registered against your home in the same way most regular mortgages or home equity lines of credit are.
How much equity will I have left?
At any time, the remaining equity on your home will depend on the difference between the home’s current value and the amount owing on the reverse mortgage.
How can I use the funds from a reverse mortgage?
It’s completely up to you. You can use the funds to pay off your regular mortgage, cover daily expenses, make home renovations, pay for medical bills, in-home care, trips, or to help a relative with a down payment of a home of their home or any number of other reasons.
How will I receive the funds from my reverse mortgage?
You can choose to receive the funds approved, advanced in the form of a lump sum or in regular monthly or quarterly payments.
What if I already have a mortgage on my property?
If you have an existing mortgage on your property, it must first be paid off so that the reverse mortgage can be registered in first priority. You can do this by using the proceeds from the new reverse mortgage advance to pay off your existing mortgage, any outstanding debt OR lien registered against your home.
Will I need to sell my house if my spouse passes away?
If both spouses are registered as joint tenants, the surviving spouse can continue to be a borrower and is entitled to all the benefits a reverse mortgage has to offer.
Who is responsible for paying property taxes?
You must pay property taxes directly to the municipality, unless you live in a province that qualifies you for a tax deferment program and avail of that facility.
Can a Power of Attorney (POA) apply on my behalf?
A POA for property may be used when applying for a reverse mortgage. Your attorney must have the ability to deal with real property. The POA may not be permitted to apply on your behalf simply because you are out of the country.
Is my mortgage portable to a new property?
Yes, reverse mortgages may be portable, subject to meeting the lender’s guidelines and eligibility conditions.
Is a home equity line of credit a better option?
A home equity line of credit could be a suitable option for you, but it does require income to qualify, and you will need to make mandatory periodic payments. This may be difficult for some retirees to maintain.
Why do I have to get Independent Legal Advice (ILA)?
ILA must be obtained by the legal titleholder of the property and, if applicable, any non-title holding spouse. ILA is provided for your benefit and protection to ensure you understand the terms and conditions of the reverse mortgage, are of sound mind and judgement, and that you are not being pressured to sign the mortgage documents.
How can I reduce my reverse mortgage interest?
To reduce interest accumulation, you can limit the amount of your initial advance and take out additional funds only as needed. There is also the option of paying down interest monthly, without a pre-payment charge.
Can I get out of my reverse mortgage early?
Yes, if you decide to pay back the loan before the end of the agreed term initially agreed upon, you can terminate the reverse mortgage early, in most cases by paying a prepayment penalty, based on lender guidelines.
Will I qualify for reverse mortgage with a low credit score?
Yes, while the credit score is a matter of consideration, a minimum score is generally not required. Typically, applicants are only required to show the ability to maintain key property expenses like property tax, heating, fire insurance, condo fees etc.
When does the reverse mortgage become due?
The reverse mortgage becomes due on the sale or transfer of the property, the last borrower moves into a retirement residence OR passes away, the mortgage is in default, per lender guidelines.
What are the documents required to procure a reverse mortgage?
Typically, reverse mortgage transactions involve very less documentation, as compared to regular conventional mortgages. These include but are not limited to, two valid pieces of ID, property tax bill, statements of debt against the property if any and other supporting statements.
Am I eligible for a reverse mortgage?
You may be eligible if you are a Canadian homeowner aged 55 +, the home is a primary residence, the minimum appraised value of your home is $250,000 and based on other factors like the location, type, condition of your home. Call me to see if you qualify and how much equity you can access.
What is the process involved in obtaining a Reverse Mortgage?
- Speak to a mortgage broker to if this is the right option for you.
- Once your situation is reviewed and the reverse mortgage option is mutually agreed upon, the application will be completed.
- Send in the documents requested by the broker, including identification, property tax, income documents and any other documents requested.
- After reviewing suitability, credit history, and eligibility, the completed application is submitted by the mortgage broker to the lender.
- Upon approval, the lender issues a reverse mortgage conditional approval and commitment detailing the amount you may be qualified to receive, the interest rate and term, certain fees, and schedule of advances (if applicable).
- A home valuation/appraisal is requested, and once completed, will be sent to the lender by the approved appraiser.
- All requested documents outlined in your conditional mortgage commitment should be completed and sent to the lender within the specified time.
- A closing lawyer to facilitate the closing of the transaction and another real-estate lawyer, separate from the closing lawyer will need to be contracted to provide you with Independent Legal Advice (ILA). Your mortgage broker can help you with this if needed.
- The lender sends mortgage instructions to the both the lawyers, in regard to your mortgage.
- You will need to meet with your closing lawyer who will be responsible to manage the closing process including the registration of the new reverse mortgage.
- You will also need to meet with the lawyer providing you with Independent Legal Advice (ILA). This is a mandatory measure to ensure that all parties (titleholder and non-titleholder, if applicable) to the mortgage receive an explanation of the nature and effect of the documents, from an impartial third-party lawyer.
- Your closing lawyer fulfill all other instructions from the lender to finalize the mortgage funding and confirm method to receive funds (i.e. direct deposit or cheque).
- Before disbursing the funds to you, the lawyer will pay any outstanding mortgages, liens, and applicable debts, as outlined in your mortgage documents.
- Throughout the process, your mortgage broker should continue to keep in regular touch to ensure any and all hiccups are taken care of in time to ensure a smooth and easy process for you and all other entities involved.
- Information provided is subject to change per lender discretion and lending guidelines.
- Subject to borrowers meeting their mortgage obligations including property taxes and home insurance paid and current, maintain property, and keep all mortgage obligations.