A reverse mortgage might just be the best option for you if you’re a homeowner that is 55 or older, and you wish to access some of your home equity while remaining in your home. While the Canada Pension Plan (CPP) and Old Age Security (OAS) are set in place to support people in the latter stages of life, for many people it can still be difficult to maintain the required monthly payments of a traditional mortgage. Unsecured debts can add up over time as we navigate our way through life, and it’s become increasingly common for Canadians to have a lack of retirement savings. The good news is that a reverse mortgage allows seniors to access their equity within the home, tax-free. A reverse mortgage frees up your cash flow and gives you the opportunity to access some of your home equity that your property has accrued, which gives you the agency to secure your financial future.
To qualify for a reverse mortgage, you must be a homeowner that is 55 or older. Payments are never required, there are very little income qualifications and credit is rarely a factor. You can qualify for up to 55% of the value of your home and you’ll receive the funds, tax-free. You’re able to sell or move at any time and you have the option to choose whether the money is received as a lump sum, in installments or as a combination. Most importantly, you maintain the title of the home and you’ll never be forced to sell.
A reverse mortgage is another option that may be better suited for you than a traditional mortgage based on your current and future financial situation. Many seniors need to tap into their home equity because they would otherwise be unable to make monthly payments on a traditional mortgage, to continue living in their home. With a reverse mortgage, payments are not required until the client has to move into a long-term care facility, decides to sell or passes away. A reverse mortgage provides you with the opportunity to use the funds however you’d like – whether you need to supplement retirement income, pay off debts or renovate your home, the option is yours.
You may be asking yourself at this point: what happens if my reverse mortgage exceeds the value of my home? Homes have increased in value in recent years in Canada with a 25% overall increase in the past year alone. With the appreciated value of your property and your increased home equity, the lenders’ calculations make sure that there will always be a positive outcome on the estate. If there is ever a negative outcome on the estate where the loan amount is greater than the value of the property, the lender will eat that cost. As the value of your home appreciates, so too does your home equity. Instead of having to sell your home now, you’re able to continue to live in your home, taking advantage of its’ equity and securing your financial future.