" If you are a Canadian senior homeowner 60 years or older,
you may get up to $500,000 tax-free from equity in your home,
with no re-payments necessary on the loan,
until you sell the house or move out of it. "
Reverse mortgages allow Canadians who are at least 60 years old, to turn the equity on their homes into cash. They can use the money they receive any way they want - make an investment, pay off high-interest debts, fund a large project, or simply to improve lifestyle. The best part is, they do not need to make payments until they decide to sell or move out of their home.
A reverse mortgage is secured by the equity in your home. Unlike a regular mortgage where the principal decreases as payments are made, a reverse mortgage increases the loan to be repaid in the future as interests are added to it over time. In short, you get the cash now, but pay later, with interests, when you are no longer living in the mortgaged home. Depending on your (and your spouse's) age, and the location and type of your home, you can receive up to 40% of the appraised value of your home.The following are some of the important highlights about getting a Canadian reverse mortgage:
- Borrower(s) must be at least 60 years old.
- The minimum amount of mortgage is $20,000 and the maximum is $500,000.
- Borrower does not need sufficient income and/or assets to qualify. The home being mortgaged just need to be owned free and clear of any debts.
- Most homes can be covered. However, leaseholds, co-ops, manufactured homes and large rural acreages are not eligible.
- The cash received from the mortgage is tax-free and will not affect the government benefits, such as Old Age Security (OAS) or Guaranteed Income Supplement (GIS), you may receive.
- No repayments are required as long as the borrower continues to live in the home as a principal residence.
- The borrower maintains ownership of the home, can continue to live in it, and never be told to sell or move out of it. All that is required is the property be maintained in good condition, and that property taxes and other obligations are paid.
- Borrower can choose how he/she wants to receive the money - whether in lump sum advance or by installment.
- The borrower can use the money any way he/she wishes to. Should the money be used for investments, the interest paid on the reverse mortgage may be deducted from the income earned from the investments, and thus, lower the taxes payable on them. Please consult a licensed financial planner or tax advisor regarding this matter.
- The equity remaining in the home belongs to the borrower.
Aside from the above-mentioned important highlights, your estate is also well-protected. It is guaranteed that at the time the borrower moves out of or sells the home, the amount to be repaid will never exceed the fair market value of the home itself. Should the heirs wants to keep the home, they can repay the loan from their own other resources.
Set-up costs are involved in obtaining a reverse mortgage. Among the usual costs are appraisal fees, fees for independent legal advice, closing, administrative and legal fees (including title search, title insurance and registration – which may be deducted from the funds released to the borrower so there is no need for additional out-of-pocket expenses).
Reverse mortgages can be complicated and their use requires careful consideration of other options available to the borrower. Should the value of the home remain the same or decrease, the amount added to the loan can easily eat up the remaining equity available. Substantial interest penalties are required should the borrower exit early or decide not to continue with it. Our advice is for you to seek independent legal advice, speak to your financial planner, and carefully consider your options in detail before accepting a reverse mortgage contract.
For more information on Canadian reverse mortgages, speak with us or complete the form on the homepage and we will contact you directly. For immediate questions, please call us at 1-888-853-8372.
