Canadian reverse mortgages allow seniors to access a part of their home equity. However, there are requirements that apply when it comes to such mortgages in Canada. Besides, we have created this post as a guide to help you comprehensively understand how reverse mortgages work in Canada.
Reverse Mortgages – How Do They Work in Canada?
A reverse mortgage in Canada is a type of loan that you can get against your home equity. However, there are requirements that apply to qualify for this type of loan. For instance, you must be 55 years old to qualify for a reverse mortgage in Canada. Moreover, you can borrow up to 55% of your home equity tax-free with this type of loan.
In addition, you also retain the ownership of your home with a reverse mortgage. Further, you do not need to repay your reverse mortgage except if you move out of your home, sell it, or die. In case you die, your heirs will pay the loan.
Types of Reverse Mortgages in Canada
When it comes to reverse mortgage types in Canada, they are similar to conventional mortgages. By the same token, you can choose a reverse mortgage from the terms. Such as a reverse mortgage with six-month to five-year terms plus choosing between fixed or variable interest rate mortgages.
Who Provides Reverse Mortgages in Canada?
Only two financial institutes throughout Canada provide reverse mortgages. Those two include HomeEquity Bank and Equitable Bank. Besides, the reverse mortgage of the former provider is called a CHIP reverse mortgage and is available in all Canadian provinces. However, CHIP reverse mortgages are not available in Canadian territories.
Furthermore, Equitable Bank offers reverse mortgages to senior homeowners residing in major cities and towns in the following provinces: Ontario, British Columbia (BC), Quebec, and Alberta. Besides, the CHIP reverse mortgage that HomeEquity Bank offers is the most popular in Canada. Originally, it was called the Canadian Home Income Plan (CHIP).
Eligibility Requirements for a Reverse Mortgage in Canada
Eligibility requirements for Canadian reverse mortgages are not strict. Further, we have mentioned them below:
- You must own a home that you use as your primary residence.
- You and others on the list of your home title must age at least 55 years.
- You may need to live in your home for at least six months.
- Further, you may require an ILA (Independent Legal Advice).
- In addition, your home must be worth more than the lender’s minimum threshold.
Besides, it is important to note that HomeEquity Bank and Equitable Bank require your home to have an appraisal value of at least $250000 or more.
Application Process for Reverse Mortgage – How It Works?
The application process for reverse mortgages varies from lender to lender. In general, you will contact the lender on the phone to know about the application process if you are eligible. You can also request a quote or check your eligibility online for a CHIP reverse mortgage. Furthermore, you will need to appraise your property value to proceed with your application.
Moreover, the lender will consider your age, location, and other factors besides the appraisal value to determine the reverse mortgage amount. In addition, you will need to choose the type of interest rate and term for your reverse mortgage. Lenders may also want you to get an ILA to ensure a reverse mortgage fits your needs or not.
Disbursements of Reverse Mortgages
When it comes to reverse mortgage disbursements, you can receive lump-sum or periodic payments.
Are Reverse Mortgages a Good Idea?
Reverse mortgages allow Canadian seniors to access money against their home equity without selling their property. They are especially handy for seniors with limited savings but valuable property.
Not to mention, you can use your reverse mortgage loan to fund products. Renovations, travel, or a second home, for example.
What Are Alternatives to Reverse Mortgages in Canada?
There are also alternatives to reverse mortgages in Canada. Selling your home & downsize or HELOC (Home Equity Line of Credit), to mention them.
Canadian reverse mortgages allow seniors to access a part of their home equity. Moreover, reverse mortgage types are similar to conventional mortgages when it comes to terms and interest rates. HomeEquity Bank and Equitable Bank provide reverse mortgages in Canada. If you qualify for a reverse mortgage, there is a typical application process that you will go through. Moreover, reverse mortgage loans are a good idea for seniors with limited cash savings and valuable property. Lastly, downsizing and HELOC are your alternatives to reverse mortgage loans in Canada.
Company name: Retire Better
Address: 34 Village Centre Pl #300, Mississauga, ON L4Z 1V9
Retire Better is a company with a team of licensed mortgage professionals who have successfully completed thousands of mortgage transactions since 2016 to date. With its knowledgeable mortgage professionals, it helps Canadians get different types of loans, such as reverse mortgages, conventional loans, and more.