9 things you should know about a reverse mortgage

Over the last couple of years, I’ve been able to assist many homeowners to better their lifestyle with the aid of a reverse mortgage. Most of them were pleasantly surprised at the flexibility it gave them.

Although once considered a "mortgage of last resort," with the recent changes in lending guidelines making it harder to qualify for standard mortgage financing, the reverse mortgage is proving to be an excellent mortgage option for Canadians.  

Here are nine things you should know about a reverse mortgage.

1. No income verification or credit checks.

Unlike typical mortgage qualification, which includes proving income and reasonable credit, a reverse mortgage looks at the age of the homeowner and the appraised value of the home.

2. No health questions.

As long as the homeowner is occupying the property as a primary residence and is over the age of 55, there are no health questions as part of the application process.

3. No mortgage payments.

Unlike a traditional mortgage, a reverse mortgage doesn't require any scheduled repayment as long as the homeowner is occupying the property.

4. Title remains in the name of the homeowner.

A reverse mortgage is exactly like any other mortgage. The homeowner maintains ownership of the home, and the reverse mortgage lender registers a charge on the title.

5. Can be used to pay off an existing mortgage and debt.

A reverse mortgage can be used to consolidate debt and payout any existing mortgages. Depending on the age of the homeowner, up to 55% of the home equity can be accessed. An excellent way to free up cash flow.

6. Receive the funds tax-free.

Any equity accessed is done so tax-free, which means it won't impact Old Age Security or Guaranteed Income Supplement payments.

7. Money can be used for any purpose.

A reverse mortgage can be used for any number of reasons: to fully enjoy retirement, cover unexpected costs, home repair, medical bills, to help family and loved ones, travel, or to supplement monthly expenses.

8. Reasonable rates.

The interest rates on a reverse mortgage are very reasonable considering the fact that there are no required payment and the simple qualification.

9. The homeowner will never owe more than the home is worth.

The homeowner keeps all the equity remaining in the home. In fact, over 99% of homeowners have money left over when their loan is repaid. The equity remaining depends on the amount borrowed, the value of the home, and the amount of time that’s passed since the reverse mortgage was taken out.

I will readily admit that a reverse mortgage isn't the best option for everyone, however, it might just be the best option for you (or someone you know). A reverse mortgage offers freedom other mortgages simply can't.

If you would like to know more about how a reverse mortgage might be a good fit for you, please don't hesitate to contact me anytime.