Options For People Who
Don't Qualify For A Reverse Mortgage
Have you been told that you do not qualify for a reverse mortgage? Or that you don't qualify for enough funds?
If so, we wrote this guide - which outlines all the options available to you.
The most common reason that someone doesn't qualify for a reverse mortgage is that the amount they qualify for isn't large enough to pay off their existing mortgage or any line of credit debts secured against their home.
Reverse mortgages are available for up to 55% of the home price in Canada - but up to are the key words here - most people do not qualify for the full 55%.
For people in this situation, there are 4 options available to you that we'd like to outline in detail - as well as some other resources to help with each option. We recommend option 4 - as it can be financially liberating - so please read through all your options. Here is a quick summary of the options we're going to be outlining in detail:
Option 1 - Do Nothing
We aren't going to spend a huge amount of time discussing this - since the fact you applied for or considered a reverse mortgage in the first place means you are probably looking for some kind of improvement on your current situation.
So let's move on to the other options...
Option 2 - Refinance Your Existing Mortgage/Debts
You can use any existing equity in your home to refinance your mortgage and pay off debts. This can include using a Home Equity Line of Credit (HELOC).
The problem is that for many people, this simply isn't an option. Qualifying for a mortgage today is harder than it's ever been in the last 20 years - thanks to new rules introduced by the Government.
You're going to probably need 3 things:
1. A reasonable annual income.
2. A good credit score.
3. Maybe even some other assets (eg. a second home).
Otherwise this isn't really an option for you.
If you do think you might qualify for a refinance - based on the 3 criteria above - you can click the button below and fill out a short application - we'll then put you in touch with a mortgage expert who can assess your situation.
Otherwise - if you don't believe you qualify for a mortgage - then we suggest you consider either option 3 and especially option 4.
Option 3 - Sell Your Home And Rent/Lease Somewhere
While our preferred option is option 4 below, there is also the choice of selling your home and renting/leasing somewhere. The problem with selling your home is that you still need somewhere to live. So you can either rent/lease somewhere (option 3) or buy a new place (option 4 - except we show you how you can use a reverse mortgage for the purchase).
You will also need to run the numbers to make sure this works - we can put you in touch with a specialist who has a specific qualitation (SRES) and has experience advising retirees how they can build a strategy around their home to help with their retirement.
We strongly suggest working with a qualified Real Estate Agent who has qualifications and specialises in this kind of plan. If you click the button below, we can put you in touch with one, since we work with many professionals who work to help retirees figure out a plan with using their home equity to retire in this way.
Option 4 - Sell Your Home, Buy A Smaller Home And Take Out A Reverse Mortgage On The New Home
There are essentially 3 parts to this plan but when executed it can set you up for an amazing retirement. What you are going to do is:
1. Sell your home
2. Buy a smaller home - in your neighbourhood - so you can still live where you have your entire life.
3. Use a reverse mortgage for the home purchase - so you can buy a home and not have to make any more mortgage payments.
This is often called 'right-sizing' but too many people get caught up on the name - the name doesn't really matter: all that matters is that this strategy can give you a major cash inflow - and really set you up for an amazing retirement, since you'll never have to make mortgage payments again.
Yes, we understand that you are probably very reluctant to sell your home. Most of our clients are. But the majority who have followed this path tell us that this was a life changer for them - in the most positive way.
Example Numbers - How This Works
Here are some example numbers to explain how this works...
Let's say you have a home worth $500,000 and an existing mortgage of $200,000. Unfortunately, you only qualify for a $100,000 reverse mortgage. Here's what you could do with option 4:
1. Sell your home for $500,000. Less your $200,000 mortgage, you'll have $300,000 left.
2. Buy a new home in your area for $300,000.
3. Take out a reverse mortgage for $100,000 on the new home.
4. You'll now be living in a home, have $100,000 in your bank for retirement and never have to make a mortgage payment ever again!
Alternatively, you could buy a home for $400,000 - using the $100,000 reverse mortgage to pay for the additional cost. There are usually quite a few options available - and you'll have to make sure you qualify for the right amount on the new home as well.
This option can be completely life changing - you still get to live in a home you own, in the neighbourhood you love, get some funds for retirement and never have to make a mortgage payment ever again.
However, we strongly recommend talking to a qualified Real Estate Specialist - who has qualifications, experience and specialises in this kind of plan. If you don't, it is easy to get this wrong.
A qualified specialist can help you run the numbers and decide if this is the right option for you. If you click the button below and fill out a short application, we'll put you in touch with a top-rated, local expert - as we work with specialists who are experts in these kind of retirement plans - all over Canada. They can then meet you in person and run you through your options.
If you'd like to discuss any of these options, you can click the links and fill out a short application form - we'll put you in touch with the right person to discuss that option.
Or if you want to discuss them with us, feel free to call us (toll-free) at 1-888-358-7771 or email us at email@example.com.
Otherwise, I hope this information was helpful.
Michael Sneddon, CPA, CA