Senior Care Access Logo

What is a Reverse Mortgage?

Province: CA

If you are over 55, own and live in your own home, an additional option may be available to you that allows you to tap into the equity in your house. If you wish to stay in your home but need money for any reason (e.g., you require care, but need an extra source of income to cover the costs) you may want to consider a reverse mortgage. With this option, a homeowner may borrow up to 55% of the appraised value of their home. The amount you can borrow is based on several factors, including age, gender, health, marital status, current interest rates and the location and appraised value of your home. The money can be used for anything. There are no required monthly payments, as long as you still live in your home. The full amount does not have to be repaid until the house is sold or the owners die, in which case the estate repays the mortgage and the accrued interest. This option is not ideal for everyone, so if it is of interest to you, you should thoroughly investigate both the pros and cons very carefully before making a commitment. Pay special attention to the impact of accrued interest on your equity over an extended time (your equity decreases as the interest accumulates). Investigate the fees involved (including legal costs), the percentage financing you will receive, and the mortgage rate being offered. You may want to compare the interest rate to that of a traditional mortgage or line of credit (usually the interest rate for a reverse mortgage is higher). Find out about early repayment and any financial penalties that may be involved. Ask for copies of all documentation prior to deciding and have a trusted friend or lawyer review them with you. You may also want to speak to your bank manager or financial advisor about other ways you may be able to free up some equity from your home. Whatever your reason for requiring extra money, consider all potential options for borrowing or using your home’s equity in light of your personal situation, current needs and possible future needs before making a final decision. For additional information visit the fact sheet prepared by the Financial Consumer Agency of Canada at www.canada.ca/en/financial-consumer-agency/services/mortgages/reverse-mortgages.html.

Esther Goldstein, B.Sc., B.S.W., RSW

connect@seniorcareaccess.com

 

Disclaimer: The information provided in this article is offered for general informational and educational purposes only. Opinions expressed are those of the writer and not necessarily Lifestyle 55 + Network, Inc/SeniorCareAccess.com. In no way are any of the materials presented meant to be a substitute for professional advice nor should it be construed as such. Lifestyle 55+ Network, Inc. has endeavoured to ensure the completeness and accuracy of the information contained on this website. However, neither it nor the administrator of the site assumes liability whatsoever for any errors or omissions, nor guarantees the accuracy of the information herein.

Resources - Housing