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written by James Nowell
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If you are looking to supplement your retirement income, and you are 55+ years old, you can use your home’s equity to do so. A reverse mortgage is a simple, smart way to access the wealth you’ve built in your home. This innovative financial solution allows you to stay in the home you love, and only pay down your mortgage when you decide to move, sell, or otherwise cease to occupy your home.
A reverse mortgage allows you to access tax-free cash from the value in your home, without having to sell. Canadian seniors can access up to 55% of the value of their home, while continuing to own 100% of their home and retaining control.
Unlike a traditional mortgage, a reverse mortgage requires no regular principal or interest payments. Instead, a low, friendly interest rate is charged, and interest is simply added to the mortgage balance. The loan becomes due when you and your spouse no longer occupy the property.
How Can the Funds from a Reverse Mortgage Be Used?
Thousands of Canadians are accessing the wealth in their homes through a reverse mortgage. They are using the funds for things like:
When you take out a reverse mortgage, you retain the ownership of your home. No regular payments are required, and as long as you keep up your obligations like paying property taxes and home insurance, and keep your home in good repair, you’ll never have to move out until you’re ready.
Moreover, because of the home equity guarantee that comes with a reverse mortgage, no matter what happens to home prices, the amount you ultimately have to repay will never exceed the fair market value of your home. Even better, if your home appreciates, or rises in value, the appreciation is yours to keep.
Eligibility Requirements for a Reverse Mortgage in Canada
To be considered for a reverse mortgage in Canada, you need to be at least 55 years old, and own your home. If your spouse or partner is also on title to your home, they must also be at least 55. The following factors are usually assessed when you apply for a reverse mortgage:
Now that you know the benefits, it also helps to explore some other factors to think about.
As long as you know the pros and cons associated with a reverse mortgage, you will know what to anticipate and how to make a decision that works for you and your family.
The Financial Consumer Agency of Canada suggests the following tips for using a reverse mortgage:
Access up to 55% of the value of your home as tax-free cash and live retirement on your own terms.
Apply NowNo monthly payments required
Never owe more than your home’s worth
Keep 100% ownership