If you are a Canadian resident of at least 60 years of age, the Canadian based reverse mortgage programs are an alternative to a conventional home mortgage.
The focus of a reverse mortgage program is to effectively provide a home equity mortgage advance that does not need to repaid or debt serviced during the life of the borrowers.
To qualify for a reverse mortgage, the applicants will need to either have their homes debt free or have a small mortgage remaining to be paid.
The amount of financing that can be advanced is based on a current market assessment of the residential property and ranges from 10% to 40% of market value, less any outstanding charges. The minimum mortgage amount that can be secured is $15,000 and the maximum at the time of writing is $500,000.
As previously mentioned, the minimum age requirement of an applicant for a reverse mortgage is 60 years of age and if there is more than one applicant (husband and wife), both individuals would have to be at least 60 years old.
One of the great features of a reverse mortgage program compared to most institutional or bank mortgages is that there is no credit requirement or income requirements for debt service. The lender’s model is strictly based on the estimated value of the real estate now and in the future from which mortgage repayment will be made once the applicants pass on.
All Canadians in all regions of Canada are potentially eligible for a reverse mortgage for properties such as single family dwellings, townhouses, duplexes, condos. All building types listed must reside on a lot no larger than 30 acres.
The interest rate on the mortgage is fixed for the first year and then reviewed each subsequent year with an adjustment potentially being made at the end of each annual term to reflect current market rates.
The applicant or applicants are required to both own and occupy the home being mortgaged and the borrower(s) must continue to live there as long as the mortgage is outstanding. If one of the applicants were to pass away, the reverse mortgage can continue on until the remaining applicant sells the home or passes away.
To provide flexibility for applicants to better deal with life events, the property can also be rented out for short periods of time and the reverse mortgage is also transferable in the event that the owner or owner choose to sell their home and purchase another residence at a different location.
Upon approval, the mortgage can be advanced to the borrower(s) in either the form of a lump sum payment or payments over time.
Any outstanding balances owing on the mortgage can be repaid at anytime, but may be subject to prepayment penalties written into the mortgage.
While there are several different residential property financing strategies that assist with your long term retirement planning requirements, reverse mortgages may be an effective tool to meet your needs.
The best way to determine whether a reverse mortgage or another form of residential mortgage financing is the best fit for your long term financial plan, we suggest that you give us a call and set up a time to go through all your options with a member of your team.
We’ll go through all the different options with you and make sure all your questions get answered so you’re in a position to make the right decision for you and family.