Love your life and your home

Reimagine your financial security with a Reverse Mortgage

Reverse Mortgage Guide

A reverse mortgage is an increasingly popular consumer loan for Ontario homeowners age 55+. It allows these homeowners to tap into the home equity they have built up in their homes to borrow up to 55% of the appraised value of their home.

A reverse mortgage is secured by the equity in your home and, unlike a home equity line of credit (HELOC), it does not require any income verification. There are no monthly mortgage payments but homeowners are still responsible for paying property taxes, home insurance, and maintenance. The repayment of the loan is deferred until the last homeowner passes away, sells or moves out of the home. Because there are no monthly mortgage payments and homeowners can receive their home equity as tax-free cash, tens of thousands of Ontarian homeowners have taken out a reverse mortgage.

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What Can a Reverse Mortgage be Used For?

When you take out a reverse mortgage, you can use up to 55% of the appraised equity from your home tax-free for whatever you like. Use the money to:

• Pay off your debts
• Repair and maintain your home
• Handle unexpected expenses
• Help your children or grandchildren
• Improve your day-to-day standard of living
• Take a special trip or make a special purchase
• Invest and grow your wealth
• Do anything else you wish or a combination of the above.

Relieve your financial stress and enjoy your retirement.

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How Does a Reverse Mortgage Work?

To qualify for a reverse mortgage, you must own a home, both spouses be at least 55 years old and have enough equity built up in your home. The amount of tax-free cash you qualify for is based on your age and the appraised value of your home. The loan is repaid when your home is sold, or the last of the borrowers moves out or passes away.

The process to get a reverse mortgage loan is straightforward. To qualify for a reverse mortgage, there are five things lenders typically look at:

• Your age
• The equity you have in your home (home must be used as the primary residence)
• The appraised value of your home
• The location of your home (specifically, the city)
• Current interest rates

The amount of tax-free money you will receive up to 55% of the equity of your home is based on the above five factors.

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What If You Have an Existing Mortgage or HELOC?

Many of my clients may have an existing mortgage or HELOC. When you get a reverse mortgage, your existing mortgage or HELOC will be paid out first. You will get the balance of the reverse mortgage up to 55% of the and debts.

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What Are the Pros and Cons of a Reverse Mortgage?

There are several factors to consider before deciding to proceed with a reverse mortgage. As with any large decision, it’s helpful to have an understanding of the pros and cons associated. Some of them include:

Pros:

• No income verification to qualify. You don’t have to prove your income in order to qualify
• Keep home ownership. You continue to live in your home and community. You maintain complete ownership and title of your home for as long as you choose. All you have to do is continue to pay your property taxes, home insurance, and maintain property, and keep current all mortgage obligations.
• No regular monthly payments. You don’t have to make any regular mortgage payments until you decide to move or sell.
• Tax-free equity up to 55% of appraised value. The money you access is tax-free and it does not affect your Canada Pension Plan, Old-Age Security or Guaranteed Income Supplement.
• Flexibility. You can decide how you want to receive the money – you can take it as a lump sum, a regular payment, or a combination of the two. You can also decide how you want to spend the money – as you see fit.
• Take control. You don’t have to pay back the loan or interest costs until you sell the home or the last spouse passes away.
• No Negative Equity Guarantee. A reverse mortgage is a non-recourse loan. Neither you nor your heirs are liable for any amount of the mortgage that exceeds the value of your home, as long as you have paid your property taxes and home insurance.
• Prepayments. Although no regular payments are required until the reverse mortgage becomes due, you have the benefit of prepayment privileges. This allows you to prepay your principal or interest without being subject to a prepayment charge. Of course, certain conditions must be met.

Cons:

• Interest Rates. Because there are no monthly mortgage payments required, interest rates can be higher for a reverse mortgage than other secured lending options.
• Loan Balance. The balance of the loan increases over time as does the interest on the loan.

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When is the Reverse Mortgage Due?

Since the Reverse Mortgage is meant for long-term lending with no quantified term, the due date of the mortgage is established on the occurrence of any of these events:

• Sale or transfer of the property
• Default
• When the last borrower moves into a long-term care or retirement residence
• When the last borrower passes away

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What do I have to pay on the mortgage due date?

• Principal and accrued interest
• Default expenses, if any
• Fees and costs
• Prepayment charge, if any

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Bottom line, a reverse mortgage can be a good way to fund a more dignified retirement. It allows you to stay in the castle you built longer, with the friends, neighbours and community you grown to love over the years.

Contact me today at 647-883-7790 or email at jag@dlcchoice.ca to see if this is the right strategy for you.