Have you started thinking about reverse mortgages? Moving into retirement can be an exciting time! You no longer need to be at work from 9-5 every day, and can spend additional time on the golf course or travelling the world. For many of us, retirement is a great time to pursue things you are passionate about or to spend time with your family. However, the unfortunate reality is that many Canadians do not have enough money saved up for retirement. According to a recent TD survey, nearly two-thirds of Canadians anticipate working into their senior years because they won’t have enough money saved for retirement. Many people don’t realize that reverse mortgages present a viable option for many Canadian seniors to navigate through financial uncertainty in retirement.
What is a reverse mortgage?
A reverse mortgage is a loan that allows you to take money out of the home equity you’ve built without having to sell your home. Also known as an “equity release,” it allows you to borrow up to a certain percentage of the home value. In simpler terms, reverse mortgages offer Canadian homeowners some extra cash to last them through their retirement by tapping into their home equity. Unlike a home equity loan, no payments need to be made on the reverse mortgage while you are still living in your home. The loan only needs to be repaid when the homeowner moves out of the home, sells the home, or passes away.
How do I qualify?
In order to be eligible for a reverse mortgage, you must be a homeowner and at least 55 years of age. If you have a spouse and you are both on the title of the home, you must both be listed on the application, and both of you must be 55 years old. Your lender will also consider the following factors:
- Your age
- Where you live
- The condition, type, and value of your home.
Is a reverse mortgage right for me?
While a reverse mortgage can be a great option for some, there are a number of situational factors that come into play when determining if a reverse mortgage is right for you. These factors include your current retirement savings, your mortgage status, as well as the home itself. Ultimately if you are struggling with retirement wealth, it’s certainly an option you should consider. It’s also very important to do your research ahead of time, and to consult a mortgage professional who can paint you the entire picture.
Reverse mortgage pros
- You can turn the value of your home into cash without selling your home
- No regular payments
- You don’t have to pay tax on the money you borrow
- You maintain ownership of your home
Reverse mortgage cons
- Interest rates can be higher than those of other types of mortgages
- Your estate will have to repay the loan and interest in full within a set period of time after you pass away
- The equity you own in your home may decrease as the interest on your loan increases
Learning about the full potential of your home equity and how it can help you through retirement can be a powerful tool. For many of us, it might be something that could be beneficial for our parents as they enter retirement. While this can be a difficult conversation to have, it can often create some much needed financial breathing room. If you think that you or somebody you know could benefit from a reverse mortgage, I’m more than happy to hear about your situation and see if it’s the correct option.
You can give me a call at (705) 333-4338 or get in touch with me here!