Why get a Reverse Mortgage in 2023?

​

Reverse mortgages are often misunderstood. The truth is, a reverse mortgage can be an excellent way to fund your retirement savings, have no mortgage payment and stay in your home for as long as you want.

​

Homeowners over 55 years of age are likely to be familiar with reverse mortgages. Its isn't just for retirees in 2023, its for anyone over 55 with equity in their home. Many take out a reverse mortgage to boost their retirement income, but it often surprises people to learn that a reverse mortgage can be used for much more than that. By using it, you can pay off debts while still living in your current home, help younger family members buy their own first home, and even buy investment properties
The tax free funds from a reverse mortgage will not affect your current Social Security income or Canada Pension Plan benefits.

​

The equity in your home can help you to retire well.

Reverse mortgages are loans that you can get on the equity in your home. The amount of money you can borrow will depend on:

• The amount of equity in your home

• How much interest you want to pay (usually about 4-6%)

• What term (length) of loaning works for you and how much money you want to receive over time. For example, if a homeowner has $200,000 in equity but wants only a 10 year term, they would receive 20 payments ($20k/year). If they have $150K and need 25 years to receive their funds, they would get 6 payments per year ($15k/year). A lump sum is also an option at anytime during the loan term prior to maturity. 

• You can opt to not pay any mortgage payment until your home is sold, refinanced or upon death.
   

How to Qualify for one?.

For homeowners over 55 years old, reverse mortgages are easy to qualify for. In contrast to other mortgage products, reverse mortgage lenders typically do not review your income or credit when approving the loan. (You might be able to pay off your consumer proposal debt with a reverse mortgage if you've recently suffered one!). 

A reverse mortgage can help you stay in your home.

A reverse mortgage can help you stay in your home. If you are approaching retirement age, or already retired and living on a fixed income, a reverse mortgage can enable you to stay in your home without having to sell it. Realtor fees are expensive vs a reverse mortgage.

​

If you choose not to use all of the money from a reverse mortgage at once but rather continue making payments into the mortgage over time (called amortizing), then this gives more flexibility when planning how best to utilize funds from such sources.

 

For example: imagine how nice it would be if someone gave us $500 million dollars tomorrow--what would we do with it? We could buy ourselves fancy cars and houses...or maybe even start our own businesses! But what happens if instead we just keep saving year after year until that day comes? Well now we've got enough saved up so that when those cars start breaking down or mortgages get too high then maybe one day later they'll need some repairs--and when they do then maybe another thing gets broken...and so forth until eventually everything's falling apart because nothing was ever fixed properly because we didn't have enough money beforehand."

​

It is a good alternative to selling a house.

When you are considering a reverse mortgage, it is important to keep in mind that you may need to sell your home in order to pay for care and medical bills. If this is the case, a reverse mortgage is an excellent alternative to selling your house.

​

Why? Because when someone sells their house due to health issues, it's not uncommon for them to take on debt in order to cover the cost of their care or medical bills. Care homes in British Columbia can run $6-10k a month.
A reverse mortgage allows seniors who already own their home (or those who own their home outright) an easy way out of this kind of situation by providing them with funds that allow them to pay off any outstanding debts while still keeping their property for as long as possible and hiring in a nurse such as Nurse Next Door.

​

You pay nothing until the house is sold.

When you get a reverse mortgage, you can choose to defer payments until the house is sold. That means that if you're not ready to move out yet, or if you want to keep living in the home but need more time before selling it, then you can pay nothing until the house sells.

Additionally, once this happens and the proceeds are paid out (minus closing costs), there will be no additional cost associated with selling the property: You won't owe anything on top of what has already been paid out through your reverse mortgage because all of your loans have been satisfied.

​

In other words, even though there are some fees associated with getting this type of loan (which we'll discuss later), they don't apply after your death or upon sale of your home as long as there's enough equity left over after settlement costs have been deducted from its appraised value at closing; otherwise known as "net proceeds." 

​

At no point will you EVER use up 100% of the equity in your home - MYTH. 

My dad has a Reverse Mortgage that he started at 75 years old, he could only access 18% of his equity (based on age, location of home, etc). Since he did his reverse mortgage back 5 years ago, his property value has increased over $200k (even in today's market)

​

It lets you tap into the equity in your home without selling it.

A reverse mortgage is a loan where you don't have to repay the money, instead paying only interest. You can use it to pay off your debts, invest in real estate (for example, buying more property or building an addition), pay for medical expenses and more.

​

Real estate is a great investment because it has historically appreciated over time. In fact, according to Investopedia: "Appreciation potential is what separates stocks from other types of investments." The reason why this happens is simple: As demand increases for any particular type of property and/or location in which it's located, so does its value.

​

In contrast with traditional mortgages that require monthly payments until they're paid off (i.e., typically 30 years), reverse mortgages allow you to tap into the equity in your home without selling it or taking out new debt—all while remaining in place as owner and occupant of the property.

 

It's TAX FREE MONEY!

If you have a reverse mortgage, the money you get from your home will be tax-free. This means that any of the proceeds can be used for any purpose, including:

• Paying off debt

• Funding college tuition or other educational expenses for children or grandchildren

• Home maintenance and repairs

• Medical expenses

• Pretty much anything. It's your money
   

Other considerations: If you choose to sell your house when you're ready to downsize or move into an assisted living facility, the proceeds from that sale will go toward paying off the reverse mortgage loan. In addition, if you choose to take out another mortgage after receiving a reverse mortgage, then that new loan will be subject to an equity penalty fee (a percentage of how much equity was taken out).
 

It's worth looking into a reverse mortgage if you're age 55 or older and own a home in Canada.

• You must be age 55 or older.

• You must own your home in Canada.

• You have to be in good health and able to meet the requirements for income and asset tests. The reverse mortgage industry has always been heavily regulated, but it's also managed by the Office of Superintendent of Financial Institutions (OSFI), which is an arm's-length agency that reports directly to Parliament.
   

Conclusion

If you are age 55 or older and own a home in Canada, then it’s worth looking into a reverse mortgage. This type of loan gives you access to the equity in your home without having to sell it or move out. In addition, there are no monthly payments or interest on these loans until the house is sold; they pay off all other debts first before any funds go towards paying off the loan balance. You can also choose how much money you want each month or even get tax-free options if eligible for social security benefits as well!