A reverse mortgage is a loan secured against the value of the home. It allows the homeowner, 55 or older, to qualify for some of their home value and convert it into cash to pay off debt, renovate their home or create an income without having to move or sell.
60% of retired Canadians say staying in their home is critical to their quality of life. 1 in 4 Canadian Senior-led households are spending more than 30% of their income on housing.30% of Canadians who are nearing retirement have $50,000 or less in savings, and 35% of those nearing retirement plan to use the value of their home to generate their retirement income.
This is where the reverse mortgage comes into play. There are two options to a Reverse or CHIP mortgage. There is an option to use your home equity for a monthly income for years to come or you can take out a lump sum and use your money to do renovations, invest, or pay out debt. The best parts of both of these option… NO MORTGAGE PAYMENTS. For as long as you live in your home you do not have to make monthly mortgage payments. PLUS, the money you receive is 100% tax-free!
So how does this work?
Interest charged on the money that you are borrowing just simply gets added back onto your borrowed amount. So the interest owed is paid when you sell the home. To make this simple, lets say your home is valued at $100,000. You want to take out $50,000 to payout your current mortgage of $25,000, payoff some credit debt of $10,000 and put $15,000 away for a rainy day. The interest owed is added onto the $50,000 and you make 0 monthly payments. When you sell your home down the road your loan amount may now be at $60-$65,000 and your value of your home may now be at $110-$120,000. You are still very much ahead of where you would have been should you had sold your home and been making monthly rental payments.
The homeowner always maintains ownership of the home and they have the freedom to move or sell at anytime. A reverse mortgage is a lifetime product. As long as the taxes are paid, Insurance is in good standing, the condition of the home are kept up and the owner is living in the property the loan wont be called into any foreclosures or anything similar. The Reverse mortgage provides a peace-of-mind that the home owner can stay in the home as long as they would like. If 2 names are on the loan and one were to pass away, the surviving homeowner can still stay in the property as long as they own the home.
As a certified reverse mortgage specialist I am here to help and answer any questions you or your loved ones have.
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Thanks for reading
Scott Bourke, AMP
Dominion Lending Centres Regional Mortgage Group
Red Deer, Alberta