Reverse mortgages continue to gain popularity for Canadian homeowners aged 55 plus. One reason for the increased popularity of the reverse mortgage is simple necessity. Many retired Canadians are looking for options to increase their cash flow either by paying-out other debts, or by accessing cash to help with everyday life expenses. In addition, Canadians have a growing preference to remain in their homes for as long as possible. Doing so may require costly renovations and upkeep. Whatever your need, a reverse mortgage might be a great solution!

Knowing the different types of reverse mortgages can be beneficial when it comes to making the selection that fits you best. We will get into each kind in detail. There are a few details, however, that lenders will generally look for. These are:

• Your age as well as the age of your spouse if they are listed on the title of your house

• Where you live

• The condition of your home, its type, and its appraised value

A good rule of thumb to consider is that the older you are and the more equity you have in your home, the more money that you could get. This is, of course, impacted by current market trends, so keep that in mind. You could even use the money from the reverse mortgage to do this.

If there is a remainder left, you can use it for a wide range of things like:

• help with regular bills

• cover healthcare expenses

• pay for home repairs or improvements

• repay debts

There is a lot of flexibility when it comes to how you spend your loan, making it one of the more versatile options out there.

There are two Canadian Schedule I banks that offer reverse mortgages: Equitable Bank and Home Equity Bank. Both banks’ reverse mortgage products are similar in their design and function. We can help you determine which is better suited to your needs.

• Home Equity Bank

• Equitable Bank

Reverse mortgages are designed to allow you to access up to 55% of your home’s equity, thereby allowing you to convert your home equity into cash. This can be done as either a one-time lump sum payment, or you can choose to structure it to receive monthly payouts. The money received through a reverse mortgage can be used to pay off existing debts, gift money to family, expand qualify of life, add safety features to the home, or expand your investment portfolio.

You can also switch your existing mortgage dollar-for-dollar to eliminate payments and increase cash flow.

The benefits of a reverse mortgage don’t just stop at the ability to cash in on your home’s equity! In fact, these benefits also include:

• No monthly mortgage payments

• No income or credit qualifications

• Very low / little paperwork required

• Title and ownership of property remain in homeowner’s name

• Flexible options to break term early and to pay interest off monthly, if preferred

• Penalty waived in the event of death or care home placement to preserve the estate

If you think a reverse mortgage might be the right option for you or your parents, contact a MERGE today to discuss your current situation and how this increasingly popular mortgage option can help.

With a Reverse Mortgage, You No Longer Own Your Home

FALSE. You always maintain title, ownership and control of your home. The reverse mortgage lender simply has a first mortgage on the title.

You Will Owe More Than the Value of Your Home

FALSE. Most reverse mortgages come with a “No Negative Equity Guarantee” the notes as long as the homeowner has met the required obligations, the amount you will have to pay on the due date will not exceed the fair market value of your home.

Reverse Mortgages are Expensive

FALSE. Much like a conventional mortgage, an appraisal of your property and independent legal advice is required for a reverse mortgage and will be similar to the costs you would incur on a regular payment mortgage. However, beyond this the only additional fees are a one-off closing and administration fee. When compared to the cost of moving to another home, the reverse mortgage is a much more affordable option.

Reverse Mortgages Have Higher Interest Rates

DEPENDS. While interest rates are typically a bit higher than a traditional mortgage, the difference is not excessive. In addition, it is important to remember that monthly mortgage payments are not a viable option for most retired Canadians. In addition, there are many who struggle to even qualify for a traditional mortgage. For these reasons, many retired Canadians are choosing reverse mortgages over conventional solutions.

You Can’t Pass on Your Home

FALSE. Another myth is that your children won’t be able to inherit your home if you utilize a reverse mortgage. This is not the case as your heirs will always have the option of keeping the property by paying off your reverse mortgage after you pass away. Plus, if you have a “No Negative Equity Guarantee” in your reverse mortgage contract, then if the mortgage amount due is more than the gross proceeds from the sale of the property, the lender will cover the difference between the sale price and the loan amount. Therefore, you will never owe more than the fair market value of the home.