You’ve built up a lot of equity over the years you’ve owned your condo. In fact, for most 55+ Canadians, property accounts for a huge part of their net worth.

‍

Imagine if you could release that equity straight into your checking account. You could renovate, give gifts to family, travel the world, or do anything else you can think of!

‍

A reverse mortgage makes that possible and is one of the best ways to fund retirement and later life. Condos are a unique challenge, but we explain how you solve it in this article.

‍

What is a reverse mortgage?

A reverse mortgage is a loan of up to 55% of your home’s value. You can unlock the equity you’ve built up in your home without needing to sell or move.

‍

Reverse mortgages are available to Canadians over 55 and can be used to fund retirement plans, start gifting inheritance early or even to pay off debts.

‍

You can find more information in our article explaining reverse mortgages.

‍

How does a reverse mortgage work?

A reverse mortgage gives you a tax-free cash payment for up to 55% of the value of your home, without sacrificing home ownership.

‍

You don’t make monthly repayments. The interest you’re charged is just added to the balance of your loan and you only repay when you (and your spouse, if you own together) no longer live there.

‍

For a more detailed explanation, we’ve written an article about how reverse mortgages work in Canada – with real world examples.

‍

Can I get a reverse mortgage on a condo?

Yes, condos are eligible for reverse mortgages. There are a few caveats, but, in most cases, you can get a reverse mortgage on your condo. You can use the cash to fund your retirement, work on renovations or do whatever you like.

‍

To be eligible for a reverse mortgage, you’ll need to meet a few requirements.

‍

Eligibility requirements for reverse mortgages on condos

As well as the general property requirements for reverse mortgages, condos have a couple of extras you need to know about.

‍

Requirements specific to condos

• The condominium corporation must not restrict reverse mortgages in its rules or bylaws.

‍

Requirements for all reverse mortgage properties

• You must own the property.
• The owner(s) must be at least 55 years old.
• You keep paying all taxes and charges for the property.
• It must be self-contained (i.e. with a private bathroom and kitchen).
• The property has to be your main residence (not a rental or vacation home).

‍

Five things you should consider before taking out a reverse mortgage on your condo

Before going ahead with a reverse mortgage application, get clear on these five key questions.

‍

1) Your condominium corporation’s bylaws

This is the make-or-break issue with condos: condominium corporations set laws and rules for the properties in your complex.

‍

The corporation represents the interests of all residents and units. You probably pay a regular management or condo fee already – this is to the corporation, so they can manage the upkeep of all the shared spaces like gardens or stairwells.

‍

Your corporation might forbid reverse mortgages – often because they worry about owners defaulting on their loan.

‍

You’ll need to ask your corporation whether they allow reverse mortgages. If they don’t, you’ll have to either petition for a change of rules or explore other options.

‍

2) Evaluate your financial needs and goals

A reverse mortgage isn’t the only option for funding your retirement (or other) plans. It’s definitely a good one, but it’s not going to be the right choice for everyone. There are other loans available, as well as selling assets outright. It all depends on your situation.

‍

So, if you want to make the right choice about your finances, you’ll need to take stock. Get a pen and paper (and probably a big pot of coffee), sit down and crunch the numbers. Try to work out:

‍

• How much money you need
• When you need it (in tranches or a lump sum)
• When you intend to spend the money

‍

With that clarified, you’ll be able to assess which option suits you best.

‍

3) Consider the costs and fees associated with the loan

Borrowing money comes with costs, but they can vary quite a lot from loan to loan. TYou only repay a reverse mortgage at the end of the loan, unlike most other loans with monthly repayments.

‍

You need to be aware of the setup costs for your reverse mortgage, though. At Bloom, we charge a processing fee, appraisal fee and ILA Certificate fee – totalling $2,300.

‍

We take these costs out of your loan. If you borrow $500,000, you’d receive $497,700 (minus any amounts that would be paid to any existing lenders). Make sure you account for this difference, in case you need every penny of your loan.

‍

Working with a financial advisor or broker will also add to your costs.

‍

4) Understand your obligations as a borrower

You should carefully consider any financial agreement you enter and be sure you know what you’re agreeing to. It’s a legally binding contract and you have to know you can meet the obligations it sets out.

‍

The main obligations to be aware of with a reverse mortgage are that you have to:

‍

• Continue paying your property taxes and home insurance
• Keep your home in good condition
• Repay the loan when the final owner leaves

‍

5) Discuss your options with a trusted financial advisor or mortgage specialist

Borrowing a large sum of money shouldn’t be taken lightly. The support of a specialist – whether that’s a broker or a financial advisor – should make the process easier and more comfortable for you.

‍

Working with a specialist will add to your costs, so you’ll need to account for that in your budgeting and planning.

‍

Why use Bloom for a reverse mortgage in Canada

Bloom offers one of the best options for 55+ Canadians looking to fund their retirement and later life.

‍

Our reverse mortgages unlock the equity you’ve built up in your condo, without the risks and regular repayments of a Home Equity Line of Credit (HELOC) or sacrificing your equity with a fractional equity arrangement.

‍

Head here to learn more about reverse mortgages and how they compare to other options.

‍

Common questions

While reverse mortgages are growing in popularity, they’re still not widely understood. We’ve answered the most common questions we hear below, to save you searching for them.

‍

How is the reverse mortgage loan repaid?

You only repay your reverse mortgage when you (or the last remaining owner) vacates the property. That’s usually either from selling your condo or passing away.

‍

Can I lose my condo with a reverse mortgage?

You only risk losing your condo if you let the property fall into disrepair or fail to pay the taxes and premiums required by law. You don’t have to worry about affording monthly repayments, as your loan is only due when you leave your home.

‍

As long as you stick to the terms of your reverse mortgage agreement, you can continue living happily in your home

‍

What happens if the loan balance exceeds the value of my condo?

You are protected by the Home Equity Guarantee, which guarantees the amount you repay will always be capped at the fair market value of your condo at the point your loan is due for repayment.

‍

If you borrowed $500,000 but your home is valued at $450,000 when your loan is due for repayment, you will have to repay $450,000.

‍

Can I use the proceeds from a reverse mortgage for any purpose?

There are no restrictions on how you use the money from your reverse mortgage. Renovate your home, travel the world, give your family a living inheritance – the choice is all yours!

‍

Unlock the equity in your condo

Condos are a unique challenge, but, if your corporation permits them, a reverse mortgage can be as easy to arrange as any other property.

‍

A quick phone call or email to your condo corporation will give you the answers you need to move forward with a reverse mortgage.

‍

From there, you can start planning for the exciting future in which you unlock the equity you’ve built up. The real challenge is deciding how you’ll spend it!

‍

You can get a no-obligation quote by answering just three questions: get a quote.

‍