A Canada Reverse Mortgage is like any other mortgage except for two main exceptions: one, it is only available to seniors aged 60 years or older and two, there are no monthly repayments required to pay back the mortgage. The main feature of a reverse mortgage loan is that a senior may own a reverse mortgage for 5, 10, 15 or even 25 years or more in time and never be required to make a monthly mortgage payment. Instead the balance slowly accrues over time ... while at the same time the house value (hopefully) continues to rise over time. Historically, over periods of 10 or 20 years at a time house prices typically increase. This process ensures equity in the home over the long term.
Regardless of market fluctuations, the Canada Reverse Mortgage lender guarantees, no matter what, that the loan balance will not exceed the fair market value of the home. In other words you can never owe the lender more than the value of the home. This is a big guarantee. In practice the lender hasn’t had to worry too much about any potential losses because they only lend up to a maximum of 40% of the house value. And while they know that yes, the mortgage balance will grow over time, they also know that the total house value will continually grow over time as well. At the start of the mortgage the equity in the home is always at least 150% more than the loan they put out. It makes ‘getting a reverse mortgage’ a great option for a senior to take out equity while not needing to be concerned about their debt ever exceeding their home value. But because ‘time’ is a factor there is an age eligibility criteria of being 60 years or older. Even at 60 it is possible that a Canada reverse mortgage may be around for 30 years! Just imagine, some lender has agreed to lend money, without any expectation of an ongoing monthly repayment, and they may not get paid back their monies lent until 20 or 30 years later. And the loan is not based on your health or your income or even your credit rating. It is a home equity lending program that is designed only for seniors that allows seniors the ability to borrow based on equity only. If they are the right age and the house is in reasonable shape then they will get a reverse mortgage. In the meantime they get to enjoy that money and use it any way they wish.
So here are some main features of a Canada Reverse Mortgage:
• You and your spouse must both be at least 60 years old or older. This age qualification is in stone and cannot be changed.
• The amount of loan that you get varies depending on your age, the house value and the location of your home. If it is in a well-populated area you will get more; in a more rural setting you will get less. If you have an average house on an average street and you are in your 60’s then you will be allowed 30% of your current house appraisal as a Canada reverse mortgage. Same property with someone 70 or older will get 40%. The minimum loan advance is $20,000 (twenty thousand) at a time. The maximum loan is 1/2 million dollars.
• We can determine the exact amount that you would be eligible for once we get an independent appraisal of your property. And if you should wish to proceed any costs associated in obtaining the reverse mortgage can come out of the mortgage proceeds at funding. You do not have to pay any costs, which can range between $1200 to $1800 depending on where you live in Canada, up front; again, it is funded when the reverse mortgage proceeds are advanced.
• You can get pre-approved for the maximum amount initially, but only have a smaller amount advanced. Then, later all you have to do is call the lender for more money at any time. You only pay for the amount you take ... not the amount that you get approved for. All money that you receive for a reverse mortgage Canada loan is tax-free. Also,
any proceeds do NOT affect any Old Age Security or Guaranteed Income Supplement government benefits you may already be receiving.
• You make absolutely NO monthly repayments while you or your spouse live in your home. This is such a big deal I am going to mention it again. With any other mortgage product you would have to make monthly payment. With a reverse mortgage you do not have to make any mortgage payments. This allows a senior to create more income by either purchasing an income with an insured annuity or a securities product. This can also occur by paying off other debt obligations and the money ‘saved’ by not making payments can be used to live and enjoy life better.
• You still get to keep the house in your name; you are still on title (just like you would with any other mortgage). And when you move or sell the home then the debt is repaid. You even have the option to ‘transfer’ your reverse mortgage to a new property.
• You keep all the equity that is left in your home. 99% of all homeowners have equity in their home when the reverse mortgage loan is repaid. In fact, on average over 50% of the house value is still equity by the time that the reverse mortgage is repaid. So the kids will be just fine. And there are other ways to keep the home for the kids at the time when the reverse mortgage needs to be repaid (when both parents are deceased for example). The children can simply obtain a normal mortgage to pay out the reverse mortgage at that time. Remember there will be equity in the home.
• Your estate is well protected. The lender guarantees that your heirs will never owe more that the home value.
• Save on Taxes! You can use a reverse mortgage to take cash out of the home and put it into investments. All the interest charged on the loan is then tax deductible.
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Rebecca joins the team with over 20 years of business, investment and real estate experience. A true advocate for the consumer, Rebecca brings you unparalleled integrity with unbiased advice. Phone anytime and discover for yourself just how easy and enjoyable the mortgage process can be.
Serving Metro Vancouver Area
Maple Ridge & Pitt Meadows BC
Direct 604.614.2382
Fax 604.463.7886
rebeccaawram@homenwork.com
www.communitylendingcentre.com
Head Office:
#200 - 5050 Kingsway
Burnaby, B.C.
V5H 4C2
