If you are 55 years or older in Canada, you can augment your retirement income. Do not know: How? It is possible to do this in Canada with a reverse mortgage. Not to mention, Canada reverse mortgage allows you to keep the money without selling your home.
In this post, we are going to tell you about a reverse mortgage in detail. It will aid you in making a decision about whether you should apply for it or not.
What Is a Reverse Mortgage?
A reverse mortgage is a loan that uses your home equity to let you access tax-free cash. Furthermore, you can access up to 55% of your home value with this type of loan. Your age, appraised value of your home, and your lender determine how much money you can borrow with a reverse mortgage.
Furthermore, a reverse mortgage is unlike a conventional mortgage, which requires you to make monthly payments. In fact, you do not need to make payments for it unless you sell your home, move out, or the last borrower dies.\
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Eligibility Requirements to Get a Reverse Mortgage
In order to qualify for a reverse mortgage, you have to meet the following requirements:
- Age of at least 55 years with the homeowner title of the property.
- You should live at least six months out of the year in your home. It is important to justify your home as your primary residence.
- You must pay the mortgage or lien you have on your property if you have it. Further, you must pay it with a reverse mortgage or other sources of funds. Moreover, applicants get a reverse mortgage advance minus the current mortgage or lien in this scenario.
- The minimum appraised value of your home is $250000.
- Your home is detached, semi-detached, town house, or condo.
If you meet these requirements, your mortgage expert will determine how much money you can borrow with a reverse mortgage. Further, it is mandatory to get a lawyer’s independent legal advice before getting a reverse mortgage. It ensures if a reverse mortgage is right for you or not.
How Does a Reverse Mortgage in Canada Work?
Canada reverse mortgage has been designed for house-rich and cash-poor homeowners. It allows homeowners to easily access and unlock their home equity as tax-free cash. Homeowners can receive a reverse mortgage as a lump sum or in regular instalments.
Not to mention, reverse mortgage loans do not affect the Guaranteed Income Supplement (GIS) or Old Age Security (OAS). Borrowers can get a reverse mortgage while maintaining the ownership of their home.
Furthermore, borrowers do not also need to sell, move, or downsize with a reverse mortgage loan. If you choose to move out of or sell your home, you will repay a reverse mortgage loan through the sale process. Moreover, the only exception in this condition is you transfer your reverse mortgage loan to a new property.
Why Are Reverse Mortgage Interests High?
Reverse mortgage interest rates are at a premium. They are often higher than most other types of mortgages. You can attribute this to the following:
- The lack of competition as you can get a reverse mortgage from Home Equity Bank or Equitable Bank.
- In addition, there is a risk with a reverse mortgage for lenders as borrowers do not need to make regular payments.
How to Get a Reverse Mortgage?
When it comes to getting a reverse mortgage, there is a process you will need to go through. Here is how the process of getting a reverse mortgage works:
- First, you submit an application. Moreover, you can submit your application virtually via the lender’s or broker’s website.
- In addition, you will need to provide answers to some basic questions and your personal information. It will determine your eligibility for a reverse mortgage.
- Once you complete the aforementioned steps, you will get an estimate of how much you can borrow.
- Then, the lender will contact you to answer any questions to learn more about you and your financial situation.
- At times, lenders also request for an appraisal on the property.
Once the lender determines your eligibility and approves your application, you will get the mortgage on the agreed terms.
Things You Can Do with a Reverse Mortgage
The first thing that you may do with your mortgage is that you pay off your debt or lien or any mortgage. Once you are done with it, you can use your remaining funds for a range of purposes. For instance, you may use it to renovate your home, purchase another property, help children with a down payment, etc.
You can augment your retirement income with a reverse mortgage if you are 55 years old or older. Besides, Canada reverse mortgage is a tax-free cash you can borrow against your home equity. There are conditions that apply to get it, such as your age, homeowner title, etc. Further, reverse mortgage loans have high-interest rates because of a lack of competition. To finish, can do a variety of things once you get a reverse mortgage, such as pay off your debts, renovate your home, etc.