Words Leslie Denko, Mortgage Broker, Mortgage Alliance Cutting Edge Lending
For many Canadian retirees, the key to a comfortable retirement is ensuring they have the cashflow needed to support the lifestyle they’ve worked hard to achieve. While some may plan to eventually sell their home to unlock equity, an increasing number are discovering a flexible alternative: the reverse mortgage.
Although reverse mortgages have existed since 1961, misconceptions have overshadowed their benefits. In Canada, however, these products are highly regulated and built with consumer protection in mind. As more people seek ways to age in place and enjoy financial independence, reverse mortgages play a vital role.
How It Works
A reverse mortgage can turn a portion of your existing home equity into tax-free cash – without requiring you to sell or move. Available to Canadians aged 55 and older, these loans allow you to borrow up to 55% of your home’s appraised value while maintaining full ownership. Approval amounts depend on your age, property value, lender guidelines and your location.
Flexible Repayment
A standout advantage is the freedom from mandatory monthly payments. Interest-only or partial repayments are optional, (up to 10% a year) and the loan becomes due only when the home is sold, when the owners move, or when the last borrower passes away.
Costs and Considerations
The average cost to set up a reverse mortgage is similar to that of a traditional mortgage. There is the added protection of having all reverse mortgage clients seek independent legal advice to ensure everyone’s interests are being taken into consideration. This additional cost is well worth the the peace of mind for all family members involved.
With interest accruing over time on a reverse mortgage, home equity can decrease. However, the reverse mortgage banks in Canada protect their clients from being in a negative equity position. They guarantee that as long as the home owner has met all of their obligations, the amount you owe on the due date will never exceed the fair market value of the home. For many retirees, this equity guarantee gives them the peace of mind to explore this option rather then selling their home prematurely due to rising costs and cash flow concerns.
Is It Right for You?
A reverse mortgage can be a powerful tool if your home is appreciating, you intend to stay long-term, and maintaining cashflow is a priority. As with any financial decision, it’s important to weigh your options – yet for many retirees, the reverse mortgage offers freedom, flexibility and peace of mind.
www.lesliedenko.com
