A reverse mortgage can be a powerful financial tool for Canadian homeowners aged 55 or older who want to access the equity in their homes without having to sell or move. In this arrangement, the homeowner receives regular payments or a lump sum based on the value of their home, while maintaining ownership. The loan is repaid when the homeowner moves, sells the home or passes away.
While reverse mortgages can offer much-needed financial relief in certain circumstances, they are not suitable for everyone. I want to shine a light on this type of mortgage to help some of my clients understand it better. Here are three scenarios when a reverse mortgage would make sense for you.
A reverse mortgage is available to anyone over 55, who lives in your home for more than half of the year and your home is appraised at the lender’s minimum required amount. If you fit into this, you could be able to borrow up to 55% of the home’s value.
You may be approved for a reverse mortgage even if you currently have a conventional mortgage on your home. Once you receive the reverse mortgage amount, you will use a portion of it to pay off your previous mortgage.
As Canadians approach retirement, many face the reality of insufficient savings or a lack of pension income to cover rising living costs. Even though the Canada Pension Plan (CPP) and Old Age Security (OAS) are available, these government benefits may not provide enough to maintain the lifestyle you are hoping for.
A reverse mortgage can be a viable option to supplement retirement income. By unlocking the equity in your home, you can receive a lump sum or monthly payments to help cover living expenses, healthcare costs or personal purchases. This can provide financial peace of mind without the need to downsize or sell their property.
Healthcare costs in Canada, while generally covered by provincial healthcare plans, can still result in substantial out-of-pocket expenses for seniors. This is the case especially when it comes to prescription medications, dental work and private care services. As people age, they may also require more expensive treatments, home care services, or assistive devices that are not covered by insurance.
In such cases, a reverse mortgage can help you cover these unforeseen medical expenses. Rather than dipping into retirement savings or taking on high-interest debt, accessing the equity in a home could help pay for necessary healthcare services. This scenario is especially relevant for homeowners who may be living on a fixed income but need to address health challenges.
One of the most compelling reasons some Canadians consider a reverse mortgage is to assist family members, particularly children or grandchildren, who may be experiencing financial difficulties. This could include paying off a mortgage, covering education costs, or helping with a down payment for a home.
While it’s common for parents to want to leave an inheritance, some may find it more meaningful to provide financial support during their lifetime. A reverse mortgage allows homeowners to access the equity in their property and provide that support without having to wait until after their passing.
Before deciding on a reverse mortgage, it’s crucial to speak with a mortgage broker, like myself, to fully understand whether this type of mortgage makes sense for you and your situation. It may be exactly what you’re after, but if not, I’ll be happy to discuss other mortgage options as well that may work better.
Start by giving me a call at 250-826-3111, applying on my website or contacting me through my online contact form. We can discuss your situation and see whether or not you will qualify for a reverse mortgage.
Let’s get your application off the ground.
