Reverse mortgages how they work

Canadian Reverse Mortgage Information

What Is a Reverse Mortgage, Anyway?

(And How Does it Work?)

What are some of things you dream about doing? Well - what’s holding you back?

If you’re like most folks the simple answer is: Money. Or lack thereof.

Yes I know there are other things that hold people back from fulfilling their dreams but money tops the list time and time again! Well if you’re over 55 then I’ve got great news for you, a reverse mortgage may be just the ticket for you. A reverse mortgage will allow you to unlock the equity in your home and let it start turning your dreams into reality!

The key difference between a traditional mortgage and a reverse mortgage is that instead of you making regular payments to someone else, the mortgage now pays you. Neither you nor your spouse ever makes any payments – principal or interest - for as long as you or your spouse lives in your home. Reverse mortgages are not a "new" phenomenon - they have been around for some time now and are both practiced and popular in a variety of countries. With a reverse mortgage your existing equity is the security that backs it.

This mortgage is exclusively available to homeowners that are 55 and over, this applies to both you and your spouse. Typically you can receive up to 40% of the value of your home. Of course the specific dollar amount you receive will depend on your age and that of your spouse, the type of home and it’s location, the appraised value of your home and any and all existing charges and or debts against it.

A reverse mortgage also offers you flexibility when it comes to how you would like to receive your money. You can opt to take it all in one lump sum draw, or you can take some now and more later, or you can even receive planned draws over a set period of time. Some folks choose to combine a lump sum draw at the beginning with ongoing draws over time. As stated previously no payments are required while you or your spouse are still living in your home. The only time you will ever be required to repay the reverse mortgage in full is when your home is sold, or if you move out.

Another major benefit of a reverse mortgage is that you receive the money tax-free. These funds are not added to your taxable income so it doesn't affect such things like Old Age Security (OAS) or Guaranteed Income Supplement (GIS) government benefits you may be currently receiving or will be receiving from the government.

What you do with the money is up to you. There may be some long overdue renovations you would like to perform or a vacation that you’ve wanted to go

on for quite some time that you can now finally take. Or you may simply want to have the peace of mind of knowing that you have some savings set aside in case of a rainy day! The only real caveat that a reverse mortgage comes with is that any outstanding loans secured by your home must be paid out from the proceeds of the reverse mortgage. Of course any and all monies beyond that are yours to keep as stated before.

With a reverse mortgage, ownership and control of your home always remains with you. Most importantly no one will ever ask you to move or sell your home in order to repay your reverse mortgage. All that's asked of you is that you maintain your property and stay up-to-date and current with any and all property taxes, fire insurance and condominium or maintenance fees while you call it home.

All the remaining equity in your home stays yours! If you were to look at the stats, you would discover that almost all homeowners who chose a reverse mortgage still have money left over when their reverse mortgage is repaid. And on average, the amount left over is approximately 50% of the value of the home when it is sold, that’s tremendous peace of mind.

If your home is part of your estate, be rest assured that your estate is well protected. With reverse mortgages you are guaranteed that the amount to be repaid back will never exceed the fair market value of your home at the time it’s sold. If your heirs decide to keep the home, all they need to do is repay the reverse mortgage back in full. This can be done with other funds or through a new mortgage on the same property.

Another benefit of a reverse mortgage is that it can also help you save on taxes. If and when you decide to use the money you receive to buy non-registered investments such as GICs and mutual funds, you may be able to deduct the reverse mortgage interest charges from the income those investments earn. If this facet of a reverse mortgage is of particular interest to you, it’s imperative that you consult a financial or tax advisor to discuss your specific situation.

There you have it - the “Coles Notes” version of reverse mortgages.

If this sounds like something that may work for you or your would simply like more information or discuss it further please fill out our quick inquiry request form at the top of the page.

In fact - if you'd like to speak to a reverse mortgage professional who can provide you with answers and information so as to assist you in making a decisions that's best for you, why not call us right now?

It's toll-free, and we'd be delighted to hear from you!


Category: Credit

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