Reverse mortgages allow senior homeowners who are 55 years of age or more to borrow anywhere up to 55% of the equity in their home. When utilizing a reverse mortgage, you can use the funds for anything you want to whether its home repairs or renovations, or even day to day spending.

What are the advantages of a reverse mortgage?

• You aren’t required to make any regular mortgage payments

• No need to prove your income to qualify

• Money borrowed is tax-free and will not affect your Old-Age Security or Guaranteed Income Supplement

• You can choose to receive the funds in a lump sum, scheduled payments or combine both.

• You can use the money however you choose.

• There is no requirements to pay back the loan or interest until you sell or pass away.

What are the disadvantages of a reverse mortgage?

• A reverse mortgage will increase your debt load, it will cause you to have less to leave to your family when you pass away.

• Reverse mortgage rates are always higher than regular mortgage rates

• The more you borrow from the equity the faster interest accumulates

• Home Equity Bank or Equitable Bank are the only 2 lenders in Canada that offer reverse mortgages

• Other costs involved in this process are home appraisal fees, application fees, and closing costs which are usually deducted from the amount you will receive

• The only way to pay off your reverse mortgage is to sell your home or pass away.

• If you happen to pass away or sell your home within 3 years of acquiring the reverse mortgage you will be required to pay a penalty.

• If you happen to pass away the borrowed amount plus the interest will need to be repaid within a set amount of time.

What are the qualifications for a reverse mortgage?

• Your current age

• Your equity

• Your appraisal

• Your property’s location

• Current interest rates

Usually, if you are 55 years old and you have a home that has worth, you’ll be approved for a reverse mortgage. The older you are the larger amount you will be able to borrow because the lender views it as though you have less time to spend it.

Are there alternatives to a reverse mortgage?

Reverse mortgages should be avoided, if possible, to fund your retirement, there are other options you should consider first. 

• Home Equity Line of Credit: Using this option you will be able to access up to 65% of the equity you have accumulated, your income will just need to be verified.

• Rent out a portion of your home: If you are needing a bit of extra money each month you could potentially rent out a portion of your home depending on what you have to work with. 

• Reinvest or Downsize: If you are close to paying off your mortgage this could be a good time to sell your home and downsize to something more affordable or even consider renting. If renting you have the option to reinvest your cash into something that can make you a good return. 

• Speak to family: If you are having a hard time making it financially and your retirement is becoming strenuous there may be a family member who can assist you in some way. 

Is a reverse mortgage right for you?

If you have another option outside a reverse mortgage, it will always be advisable to look into those options first. Lowering the equity in your home will increase risk if the market crashes or if your forced to sell your home. However, if you completely understand a reverse mortgage, you have cleared it with your financial expert, you are confident about it, a reverse mortgage could be a good way to live a more comfortable retirement. We can guide you through the process and explore all avenues of this decision with you so you can make the best decision for your future and your family. We are happy to assist you with your mortgage and retirement goals as a whole.