Canadian
Reverse Mortgage FAQ's
(Common
Concerns about Utilizing a Reverse Mortgage in Canada)
What
is a reverse mortgage?
A
reverse mortgage is a mortgage loan against your home that
enables you to access up to 40% of your home’s current
appraised value in the form of tax-free income. So long as
you continue to live in your home the mortgage never comes
due. Equally as important it does not come due until the last
borrower either passes on, sells or leaves the home.
Okay
- what’s the catch?
Well
actually there is none. The lender makes the loan based on
your age, your home’s location and value to a maximum
of 40%. They get their money back with interest when the last
borrower dies, permanently moves out of the house, or sells
the house.
So
in a nutshell you get a portion of the value of your home
in tax free dollars, still keep on owning and living in the
house and best of all not make any out of pocket monthly payments
(the interest cost is instead accrued and added to the mortgage).
What’s
the qualification criteria for getting a reverse mortgage?
For
starters you and any other owner of the home need to be at
least 55 years old. Second, the home must be your principal
residence. Lastly any and all existing charges against the
property cannot exceed up to a maximum of 40% of it’s
current appraised value.
If
my home isn’t paid off, am I still eligible for a reverse
mortgage?
Yes,
so long as the debt does not exceed up to a maximum of 40%
of it’s current appraised value. All outstanding debt
registered against title must be satisfied with the proceeds
of the reverse mortgage.
What
am I allowed to do with the money from the reverse mortgage?
Anything
you want, after all it’s yours isn’t it? Some folks
use it for making repairs and improvements to their home.
While others use it for vacations and some invest it. Some
use it as an early inheritance for their kids and or grand
kids. And some just put it away for a rainy day! If you are
going to invest it, do yourself a favour and get the advice
of a professional tax & investment advisor.
How
is this different from a traditional mortgage or home equity
line of credit?
Well
for starters there is no income qualification process. So
long as you meet the basic criteria outlined above you’re
eligible. Next there are no out of pocket payments due and
really there is no maturity date, so long as you either live
or own the home the mortgage will never come due.
Does
the lender own the house?
Not
at all, just like any other mortgage they register a charge
against title, but it’s still you and your spouse who
own the house!
Can
my home ever be taken away from me?
NO!
So long as you continue to live in your home it cannot be
taken from you even if by some fluke you outlive it’s
value versus what you owe on the reverse mortgage. The backbone
of the reverse mortgage is that neither you or your estate
can ever owe more than the home is worth at the time of it’s
sale.
Am
I free to will my home to my heirs?
Absolutely!
You are welcome to pass the house on to your heirs however
if they choose to keep it they will need to ensure that the
reverse mortgage is paid off in full at the time of your death.
If instead they choose to sell the home any surplus beyond
what you owe will go directly into your estate.
Does
it cost anything out-of-pocket to get a reverse mortgage?
Yes,
like any other mortgage transaction there are costs associated
with a reverse mortgage. Keep in mind that the following are
only borne if you choose to proceed and get the mortgage.
Appraisal
Fee
•
Typically from $175 to $400 as an out-of-pocket cost.
• Actual amount varies by province and for urban and
rural properties.
• Request for an independent appraisal is ordered through
the lender.
Independent
legal advice is required
•
Typically $300 to $600 as an out-of-pocket cost.
• Price range assumes no title issues.
• At your request, lender can provide a list of legal
advisors in your area.
• It is strongly recommended that you discuss individual
fees with the legal advisor of your choice before proceeding.
Legal,
closing and administrative costs
•
Costs are $1,495 for all of our interest rate options.
• These costs will be deducted from your reverse mortgage
so they are not an out-of-pocket expense.
• Includes title search, title insurance and registration.
In
which ways can I choose to receive my money?
•
You can get the money all at once as a lump sum.
• You can receive monthly payments.
• You can take the money as needed.
• You may choose a combination of any of the above.
Am
I going to be taxed on these monies?
Not
at all! Since this is a loan based on your principal residence,
the money you receive is tax free. So it doesn’t impact
such things as your OAS or GIS government benefits you may
be receiving.
Where
do I go from here?
Take
a close look and, if after doing so, if you would simply like
more information - or if you'd like to discuss it further
with us directly, please fill out our quick inquiry request
form at the top of the page, and we'd be delighted to help
you and answer any questions you may have.
In
fact - if you'd like to speak to a reverse mortgage professional
who can provide you with answers and information so as to
assist you in making a decisions that's best for you, why
not call us right now?
It's
toll-free, and we'd be delighted to hear from you!
Call
Right Now:
1-877-686-4246
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