Pros And Cons Of A Reverse Mortgage

In  this article we thought we would outline the real pros and cons of a reverse mortgage.

Like any financial decision, there are both advantages and disadvantages that need to be considered.

As the leading specialists in Canada, we believe in objectively showing you both the advantages and the disadvantages of a reverse mortgage – so you can rest assured that the decision is absolutely the best one for you.

You want to make your decision while being informed and educated about all the facts.

So in this latest article, we’d like to take a look at both the major pros and the cons of a reverse mortgage in Canada.

But What Exactly Is A CHIP Reverse Mortgage?

If this is your first time reading about this kind of mortgage, I strongly suggest you
click here to learn more if you have not already downloaded our free guidebook – in that you’ll learn everything you need to know about reverse mortgages in Canada.

Pros And Cons Of A Reverse Mortgage

PROS:

1. You Own Your Home For Life.  Period.  No Exceptions.

By far the biggest advantage of this mortgage product is that it allows you to get money out of your home with absolutely zero risk that you’ll ever lose ownership of your home.

This product – unlike what some people believe – is designed to keep you in your home for life.
Unlike a ‘normal’ mortgage, home equity loan or a home equity line of credit – you are guaranteed to keep ownership of your home for life and the lender cannot take it away for any reason whatsoever.  This is actually written into the legal agreement in black and white. 
This is because no repayments are required – failing to make repayments is the major reason that mortgage or home equity lenders risk losing their home.

 

2.  Freedom And Flexibility

Increasingly in Canada, the majority of savings one has upon retirement are tied up in property.
With property prices being so high, this type of mortgage allows you to take advantage of this and get some of the equity back out of your home.
The money you take out can be spent on anything you like – you have the complete freedom and flexibility to decide.  You’ve worked hard your entire life – now is the time to reap the benefits, live worry-free and free of debts or stress.
You don’t have to make any payments (although you can voluntarily make some if you like!) and there are no rules or requirements on how you spend the money.  This is as it should be – you invested into your home over the years and you should now reap the benefits – turning it into a ‘home pension’ by taking out a reverse mortgage is one way to do this.

 

3.  100% Tax Free

The money you receive – regardless of how you choose to receive it – is tax-free since it is technically a loan and not income.
Unlike pension withdrawals or other forms of retirement funds, it is not taxed at all.  Not one penny.

 

4.  No Re-Payments Required

The whole purpose of this loan is financial freedom – not loading you with more debts that you need to worry about paying!

 

Through conservative lending and not lending over a certain value of your home (55% maximum), it is possible to maintain the equity in your home without requiring you to make any repayments – home valuation growth can offset the loss of equity instead.

 

5.  Safety If The Housing Market Declines

Even if there was a massive housing crash, you will never owe more than what your house is worth at sale – guaranteed. Even when things such as Brexit occur, we are there to help you.

 

This is written into the contract.  So you are protected against any future potential housing shocks.  You don’t need to worry about what’s going to happen with the housing market in Canada.
And, best of all, 99% of reverse mortgages in Canada have equity remaining when the mortgage is removed.  The other 1% is capped to what the home is worth – it can never be above this.
So you also don’t need to worry about leaving a bill behind for your family.

 

 Cons Of A Reverse Mortgage

DISADVANTAGES OF A REVERSE MORTGAGE:

1.  Interest Rates

The amount you receive is still liable to interest.  Although you will never have to make any re-payments, this could reduce the equity in your home over time – but only if interest rates are more than double your property value appreciation.

Interest rates are almost always higher than a ‘normal’ mortgage or Home Equity Line Of Credit (HELOC) but lower than a Line Of Credit (unsecured), Car Loan, Loan or Credit Card rate by quite a bit.
The rates are low enough that growth in your home price should offset the interest – or in many cases just now, you can actually still see your home equity grow – even with a reverse mortgage on your home.
However, you need to factor this in and decide if the rate is worth paying for all the features and benefits (listed above).  For more on this, see our article on interest rates and penalties:

 

2.  Moving Home Is Harder

The whole purpose of this product is to help you stay in your home.

 

So if you were thinking about maybe moving to another residence in future, it’s a little more difficult as you’d have to close out the mortgage first.
Of course you can just pay off the mortgage with the proceeds from the sale of your home (as we noted above, you can never owe more than what your home is worth at sale).  However, it does add a little more complexity to the decision to move home.
It should be noted that the same applies to any type of mortgage or loan secured on your home.  A ‘normal’ mortgage or Home Equity Line Of Credit would have the exact same disadvantage.

 

3. You Might Not Be Eligible

While you do not need good income or an excellent credit score – which you would need for most mortgage products, there are some restrictions on eligibility.

All property owners listed on title must be over 55 and your age(s) will determine how much money you are eligible for – in general, the closer you are to 55 the less you are eligible for.
This is because of how conservative the lending is.  If they were not as conservative, people would see their home equity being eaten up – so these rules are put in place to protect you and your home equity.
Furthermore, this product is only available on your primary residence – not any vacation or mobile homes.

 

4. Reduction Of Your Estate Size For Inheritance

Of course one of the disadvantages of a reverse mortgage (depending on your outlook) is that you are reducing the estate size available to your relatives for inheritance.  For this reason, you might consider speaking to any relatives or family members during the process of applying to ensure they are happy with everything.

The other thing to note is that you are only reducing your estate size if you actually use the all the money.
Of course, if you don’t actually use the money then your estate size stays the same – you have just moved some of the value of your estate out of your home and into your bank account – it is still in your estate just in a different format.
The actual impact on your estate size will then depend on how much of the money you use and the growth in your home prices vs the interest rate.  Some people (many people in Canada just now) are actually seeing their estate size increasing despite having a reverse mortgage on their property – this is because home price appreciation is offsetting both the interest rate and money being spent.
It would definitely not be prudent to rely on this happening though and factor in a reduction in estate size to your decision.

 

In Summary

I hope the article above helps you decide if this is a great fit for you.

 

Sometimes you will have heard other rumours or ‘facts’ about the disadvantages of a reverse mortgage in Canada – mainly this is people confusing them with the American version of the product.

 

If you want more information, feel free to leave a comment below.

The above information represents the real and true pros and cons of a reverse mortgage – if you have any other questions or concerns then feel free to leave a comment below and we’ll respond in due course.

99
Leave a Reply

47 Comment threads
52 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
49 Comment authors
  Subscribe  
newest oldest most voted
Notify of
Claudette Linchet

Please send info to the about e-mail. Thank youClaudette Linchet

Vote Up0Vote Down  Reply
5 years ago
Mich

Hi Claudette

I have emailed you our free reverse mortgage guide – you can also download it at: https://www.reversemortgagepros.ca/reverse-mortgage/

Thanks,
Mich

Vote Up0Vote Down  Reply
3 years ago
Al Stacey

What maintenance and upkeep and taxes is the home owner responsible for? Al Stacey

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Al

Maintenance and upkeep is solely up to you as the home owner – there are no rules with regards to this.

However, you are still responsible for property taxes and also keeping up any home insurance.

Hope this helps.
Thanks,
Mich

Vote Up0Vote Down  Reply
3 years ago
Chin Tack Ham

Is the interest of Reversed Mortgage TAX DEDUCTIBLE????

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Chin,

That’s a good question! You would need to talk to a tax expert about that as we are not qualified to answer tax questions.

Thanks,
Gavin

Vote Up1Vote Down  Reply
1 year ago
zaine

i have a secured line of credit i was told i would have to get rid of it on the the title before i could even think of applying im not to kean on that idea.

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Zaine

That information is correct, but you can use the reverse mortgage funds to pay it off. For example, let’s say you qualify for a reverse mortgage of $50,000 and your secured loan is $10,000. You would pay the $10,000 off first then keep the remaining $40,000.

Thanks,
Mich

Vote Up0Vote Down  Reply
3 years ago
Gregg

Basically you are going to receive lets say, our $500,000 house and your only going to pay $200,000 or less. You are not nearly telling people the worst things that can happen! Interest rates have to be renegotiated every 5 years or less. You charge much higher rates than a normal mortgage. If they spike they will lose their whole equity in a very short time. You need to publish some examples of what can happen.

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Gregg Thanks for your comment. I would say that it’s impossible to address all aspects of this product in one article, without making it over 10,000 words and way too long! What you are talking about (interest rates being charged and the impact on equity) I address in the following article (including giving examples): https://www.reversemortgagepros.ca/rates-and-penalties/. If you are worried about rates spiking, you can fix your rate. And yes, you do have to reconsider the rate every 5 years – but this is the same with almost any mortgage product or any product tied to a home loan. The… Read more »

Vote Up0Vote Down  Reply
3 years ago
francinevienneau

thank you for your info can you send me a telephone number so we can reach you

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi There

You can call us directly (toll-free) at 1-888-358-7771. Alternatively, if you fill out our simple and easy ’90 second’ online assessment form, we can take a look at your circumstances and advise you as to which mortgage product is the best fit for you – https://www.reversemortgagepros.ca/apply-now/

Thanks,
Mich

Vote Up0Vote Down  Reply
3 years ago
Gerry Taylor

Is there a penalty for trying to discharge the “loan” before 5 years?

Vote Up1Vote Down  Reply
3 years ago
Mich

Hi Gerry

Yes, like every single mortgage product out there, there is a penalty for discharge before 5 years. If you head over to the following article you’ll find everything you need to know regarding reverse mortgage penalties: https://www.reversemortgagepros.ca/rates-and-penalties/

Thanks,
Mich

Vote Up0Vote Down  Reply
3 years ago
Mary Louise Emerson

Why do the banks not deal with reverse mortgages ?
How is a regular mortgage discharged from a bank to receive a reverse mortgage?

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Mary Good question – I would assume you mean the ‘Big 5 Banks’ (RBC, CIBC, BMO, Scotiabank or TD) – HomEquity Bank who provide the reverse mortgage are actually a Schedule A bank themselves! Unfortunately I don’t know the answer but I would guess (just my personal view) that the reason they do not deal with reverse mortgages is that it is a very specialist product. So it would require extensive education of their employees and bringing in some additional resources to support it. On top of this, the upfront costs are high and you potentially won’t see any… Read more »

Vote Up0Vote Down  Reply
3 years ago
J Borges

Is it permitted to rent out your home while holding a reverse mortgage?

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi There Firstly, the residence must be your principal residence. There is no getting around that. You could not rent it out and live somewhere else. This is the same for all mortgages, which usually have a clause in them requiring it to be your principal residence – as there are different rates for mortgages that are not a principal residence. However, if you lived there for 6 months and were ‘snow birds’ the other 6 months (renting it out) I do not see a problem with this – as it is still technically your principal residence. Another example would… Read more »

Vote Up0Vote Down  Reply
3 years ago
Irene McFetridge

Please email me a reverse mortgage calculator when available. Thank you.

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Irene,

Unfortunately we are unable to email you a reverse mortgage calculator, but we would be happy to provide you with a free quote to show you how much you potentially qualify for. You can either fill out an app on our website: https://www.reversemortgagepros.ca/apply-now/ or call us directly, toll-free at 1-888-358-7771 and an agent will be happy to help you.

Thanks,
Mich

Vote Up0Vote Down  Reply
3 years ago
Roy Sawchuk

I have $100,000 remaining on my mortgage. Do I qualify for a reverse mortgage and if so, must I use the funds obtained from the reverse mortgage to pay off the existing mortgage?

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Roy
Yes you can qualify for a reverse mortgage with an existing mortgage on the property. However, the existing mortgage would need to be paid in full first from the reverse mortgage funds and you would be left with anything that is remaining. I think you will find this article on our website useful: https://www.reversemortgagepros.ca/top-8-misconceptions/

Thanks,
Mich

Vote Up0Vote Down  Reply
3 years ago
Nancy

Can a reverse mortgage be in both owners names, so when one person passes, the other can still stay in the house?
Once the owner passes, when does the property have to go on the market?

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Nancy Not only can a reverse mortgage be in both owners names, but it must be in both owners names for this exact reason. In the U.S. this would happen a lot – the owner passes away leaving the remaining person to sell – but in Canada this rule was created to stop this happening. So, a reverse mortgage must be in both owners names (meaning both must qualify for it – be over 55) and when one passes away the other can still live in the home for the rest of their life as well – with absolutely… Read more »

Vote Up0Vote Down  Reply
3 years ago
Jeanette

I have a relative who wants to do a reverse mortgage with his apartment, which he owns, but he is over $200,000 in debt on a line of credit….would this be a wise choice?

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Jeanette It really depends, I’d have to get more information. If this is a personal line of credit (i.e. unsecured) then the interest rate will be higher than a reverse mortgage and this would be an easy choice; if this is a Home Equity Line of Credit and they are comfortably managing the payments, then it might not be the best option. Really, it comes down to cash flow and freeing up more cash. If they are comfortable with their financial position, then there is no need to change it. A reverse mortgage is best suited as a financial… Read more »

Vote Up0Vote Down  Reply
3 years ago
jeff

my property worth around 850000 and I have a mortgage of around 229000 and home equity loan of around 110000,i am 64 years old how much cash would I get from reverse mortgage?

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Jeff

It would depend on the property type and location, in addition to the information you gave me. Based on my experience, the amount of reverse mortgage you qualify for should be close to enough to cover the $339,000 you’d need to pay off the mortgage and HELOC – but it would really depend on property type and location.

Thanks,
Mich

Vote Up0Vote Down  Reply
3 years ago
Linda Lee

What happens if the amount of equity you have goes above the amount qualified for because of interest , let’s say we are on a fixed income and no longer qualify to get that amount as a mortgage?

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Linda

I am not quite sure what you mean. If the reverse mortgage balance increases, there are no repercussions – you don’t need to constantly re-qualify every year or anything like this – once it’s on there, you never have to worry about it again.

In addition to this, the amount you own is capped to the value of the home – you can never owe more than your home is worth. This is because a reverse mortgage is a ‘non recourse’ mortgage.

Hope this helps.

Thanks,
Mich

Vote Up0Vote Down  Reply
3 years ago
Darlene

Do you do reverse mortgages on mobile homes

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Darlene

Yes, you can get a reverse mortgage on a mobile home. However, the value of the home must be above $100,000 and the minimum reverse mortgage is $25,000.

Thanks,
Mich

Vote Up0Vote Down  Reply
3 years ago
Wally

I’m trying to make sense of this. Say I owe 360k on my mortgage and my house can sell for 1.1M that leaves me with 740k equity. 55% of that would qualify me for 407k if I meet all requirements for full amount. If I pay off my mortgage, I’m left with 47k. Do I start paying the higher interest rates from this type of mortgage immediately on the 360K I used to pay off my mortgage?

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Wally Actually – if you qualified for 55% – you’d qualify it on 55% of your total house value, not your equity. So 55% x $1.1m = $605k. The interest would depend on how much you took from this $605k. You’d have to take a minimum of $360k – to pay off your existing mortgage. Interest would then immediately apply to this amount. After this, it would only apply to any additional amounts (up to the $605k) that you withdrew. It only applies at the point of withdrawal too. So you could pay off the $360k mortgage and not… Read more »

Vote Up0Vote Down  Reply
3 years ago
dan

i would be most interested in receiving a reverse mortgage calculator.
It appears the key issue is the interest rate difference between a reverse & traditional mortgage ?
thanks

Vote Up0Vote Down  Reply
3 years ago
Mich

Hi Dan

Yes, that is one of the key issues to think about. A better way of putting it is that all the benefits of a reverse mortgage (no monthly payments, easier to qualify for etc.) are what you get in return for paying a higher interest rate than on a traditional mortgage.

Thanks,
Mich

Vote Up-1Vote Down  Reply
3 years ago
Ruth Martin

Do I have to pay off a current regular mortgage I have wiith a CHIP mortgage?

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Ruth

Yes, you have to pay off any existing mortgages. So let’s say you have a $100,000 mortgage and are able to get $150,000 from a reverse mortgage. In this case, $100,000 would be used to pay off your existing mortgage and you’d be able to keep the additional $50,000. Of course, you also now have the advantage that you don’t have monthly mortgage payments to make – so freeing up cash flow is an important consideration.

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
Guy

I have a reverse Mortgage and I was just mailed my 2017 annual statement which has a line stating that my Maximum Interest Deductible for 2017 is $2842.13. Can I claim this amount as a deduction for my 2017 Return?

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Guy

You could not deduct this unless you could prove that you used the money for the reverse mortgage for business/income. For example, if you invested the money then you’d be able to claim this as a deduction against your investment income.

Otherwise, you cannot deduct this unless you used the funds to actually generate some of your income.

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
Barb

Is there a lender or broker fee involved? I understand there are appraisal fees, legal fees and title insurance.

If the home owner passes away, is there a time limit that the reverse mortgage needs to be paid out by or will the bank wait for probate and the sale of the home?

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Barb

The lender may charge a fee but it is added to the mortgage – you can see all the costs and fees in detail at: https://www.reversemortgagepros.ca/costs-and-fees/.

After all home owners have passed away, the bank will usually communicate with the Estate lawyers to plan next steps. Sometimes someone inheriting the house may wish to keep it, so they are given time to obtain a new mortgage to pay off the reverse mortgage. The whole process usually takes around 6 months.

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
Barb

Mich! It is important to know if the lender charges a fee as these can be quite substantial. As there is only one lender who deals in reverse mortgages in Ontario, this should be an easy question to answer. “May” is not good enough!

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Barb The answer is at the link I provided – with an outline of all fees charged by the main reverse mortgage lender in Canada (HomEquity Bank) – https://www.reversemortgagepros.ca/costs-and-fees/. The reason why I use the word ‘may’ is that the this fee isn’t (at present) technically a lender fee – but meant to cover the legal costs too. This amount may decrease or increase over time – or change in nature – if I respond with exact information in a comment, I have to then remember to come back and find every single comment where I’ve addressed this –… Read more »

Vote Up0Vote Down  Reply
2 years ago
Barb

Mich! Your costs sheet states the legal, admin and set up fee is $1750. I contacted Home Equity bank CHIP program directly and they advise that the one time admin fee is $1795 and legals are extra. They also said any lender and broker fees would be paid at their end. You can see why I am confused! I’m not interested in hidden fees!

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Barb

I guess they must have put it up very recently – I will check and confirm but $45 should not make a difference to your decision, I’d hope – especially since this is not out of pocket.

The legal fees they are talking about are included in the list on the page I sent you (https://www.reversemortgagepros.ca/costs-and-fees/) – see the section on ‘Independent Legal Advice’.

These are all the costs and fees, even if the admin fee has changed by $45 – which I will confirm.

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
Rick

If owner ended up in a long term care facilities would they have to sell there house or could they keep it in hope of going back home some day ??

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Rick

There is no obligation to sell your home ever. In addition to this, if you are breaking a reverse mortgage to move into a long term care facility, the penalty is reduced by 50%.

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
Barry Campbell

A reverse mortgage is approved for 2 people on a joint (husband and wife) owned property and after several years one spouse moves out of the residence and move to a different residence. The other spouse (who remains in the residence) does not want to leave the residence. Can the spouse who remains be forced to leave or sell agree the residence as the spouse who has left wants their 1/2 share of the sale of the residence after the residence is sold and the reverse mortgage is paid off?

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Barry This question is a little tricky, as family law comes into play. There is no way to force a sale. However, if the spouse who left wanted removed from the mortgage you’d have to ‘refinance’ your reverse mortgage (in the same way you’d have to any other mortgage, under these circumstances) to remove them from it. In your situation, I would mention this scenario to the independent legal adviser (who you’re required to consult) before taking out a reverse mortgage. For example, if the spouse wanted their half then lawyers would have to be involved and family law… Read more »

Vote Up0Vote Down  Reply
2 years ago
Louise

Can you pay the interest on a monthly basis if your approved

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Louise

Yes, you can pay the interest each month. The difference is that this payment is voluntary and you’re not forced to make it.

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
Marianne

I had my home appraised by a certified appraiser – do I have to do this again ??

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Marrianne

It depends if the appraiser is one that the lender approves of. If they are, then you are ok.

Lenders have lists of appraisers that they have approved – they do this to protect themselves. The reason is that there have been cases where someone got their buddy – who was a licensed appraiser – to do the appraisal and they want to avoid this kind of thing happening.

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
Jennifer Lehman

If one has a reverse mortgage in place, can they still use the deferral program for payment of house taxes, or does this break the contract?

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Jennifer Are you based in BC or Alberta? Both these provinces have deferred property tax rules that differ slightly. For BC, yes you can still use the deferral program. However, you would need to get the property taxes paid up to date at the time of funding the reverse mortgage – then go back on to the deferred taxes list. You should also contact your particular city ensure it’s fine for them to do so, but from the lenders perspective it is fine. For Alberta, unfortunately not. Once you get the property taxes back up to date, the Province… Read more »

Vote Up0Vote Down  Reply
2 years ago
Dave

when owner(s) pass away, what happens to the sale of the home. if the home owner borrowed 100,000 at the time of their death the home sold for 300,000 what portion goes to the reverse mortgage and what portion goes to the estate?

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Dave

In this case, of the $300,000 sale price then $200,000 would go to the Estate and $100,000 to the lender to pay the balance owed. 99% of reverse mortgages are in positive equity (like this) when discharged.

Thanks,
Mich @ RVMP

Vote Up0Vote Down  Reply
2 years ago
Connie

I have a secured line of credit of 40,000.00. No mortgage. My house is worth approximately $250,000.00. Would a reverse mortgage be an advantage or disadvantage to me?

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Connie,

This is a good question and a tricky one for me to answer without knowing more about your situation. In some cases, it can be advantageous if the payments are causing you stress, as you are not required to make any payments on a reverse mortgage. This article explains how the reverse mortgage compares to alternatives such as a Secured Line of Credit Alternatives to a Reverse Mortgage.
You can also call us toll-free at 1-888-358-7771 and speak to a qualified professional and they will be happy to help you.

Thanks,
Gavin

Vote Up0Vote Down  Reply
1 year ago
Vee

Hi how soon after I purchase a home do I have to wait before I can apply for a reverse mortgage ? ..example…. I purchase a home for $400,000 and mortgage for $100,000. when can I apply for reverse mortgage for the outstanding amount ?

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Vee

Not only can you apply immediately, but you can actually use a reverse mortgage for the purchase (rather than taking out a traditional mortgage)! See point number 8 in this article: https://www.reversemortgagepros.ca/8-interesting-ways-to-use/

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
George Gill

hi I would like to find out approx. amount we qualify for on a reversemortgage

Vote Up1Vote Down  Reply
2 years ago
Mich

Hi George

The easiest way to find out is to fill out our simple 90 second application form at https://www.reversemortgagepros.ca/apply-now/

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
Mario

Could I still rent my basement suit

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Mario

Yes – a tenant is totally fine – similar to a normal owner-occupied mortgage (which allows this).

However, the lenders would not be happy if there were multiple tenants (locks on the doors) because this would be closer to a boarding/rooming house and rooming houses are not eligible for a reverse mortgage, even if the owner lives there.

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
Samantha

I don’t see a calculator on your site that would provide a clear indication of the costs throughout the life of the reverse mortgage so that I could calculate accumulated costs . I’m curious whether the interest charged compounds monthly? Semi-Annually or ?? If you can provide this, I’ll develop a spreadsheet which would also consider exit penalties at various stages. Thanks

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Samantha

I had a calculator before but it just led to hundreds of questions and a lot of confusion.

With regards to compounding interest, it is semi-annual (the same as almost every mortgage in Canada). This and exit penalties are both covered in this article: https://www.reversemortgagepros.ca/rates-and-penalties/.

Thanks,
Mich

Vote Up0Vote Down  Reply
2 years ago
Jacqueline Pancott

How much interest do you currently charge on reverse mortgages?

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Jacqueline

See our rates and penalties page for the latest on this: https://www.reversemortgagepros.ca/rates-and-penalties/

Thanks,
Mich

Vote Up0Vote Down  Reply
1 year ago
Jan

Do you pay interest in the accrued interest? I.e. initial loan is $100,000 and total interest for the first year is $5,000, is the interest for the following year calculated on $105,000, second year on $110,000 and so in? Or is the interest always just calculated on the initial $100,000. Also when renewed would the loan amount become $125,000 (total of $100,000 plus 5 years of interest?

Vote Up0Vote Down  Reply
2 years ago
Mich

Hi Jan

You do pay interest on the interest – this is the same as any mortgage (or line of credit or credit card) in Canada. It’s called compounding interest. They accrue the interest twice a year – this is called being compounded semi-annually – which is how every mortgage in Canada works.

Thanks,
Mich

Vote Up0Vote Down  Reply
1 year ago
Joe Stenta

Do both my wife and I have to be over 55, or just myself to quality?

Vote Up0Vote Down  Reply
1 year ago
Mich

Hi Joe

Both of you will need to be over 55, even if your wife isn’t on title.

Thanks,
Mich

Vote Up0Vote Down  Reply
1 year ago
Katie

Hi Mich ..hope your day is well ..you have mentioned that property taxes and insurance is still home owners responsibility , but also I read here that we can also defer our house taxes . sooo can I defer my taxes while being “in” a reversed mortgage . Thanks for your input .

Vote Up0Vote Down  Reply
1 year ago
Mich

Hi Katie

That’s a great question! I don’t talk about deferred property taxes and reverse mortgages much on this site – because these are only programs that are run in BC and Alberta.

The answer to your question – if you can go back to deferring taxes while in a reverse mortgage – is yes (for BC) but no (for Alberta).

Thanks,
Mich

Vote Up0Vote Down  Reply
1 year ago
Gordon Atherley

Hello Mich

My wife and I have a reverse mortgage. As an experienced researcher, I would like to speak with you by phone, please, because I am seeing problems of security.

Thank you.

Vote Up0Vote Down  Reply
1 year ago
Mich

Hi Gordon

You can click ‘schedule a call’ at the top of the page to arrange a phone call. However, I will let you know that – due to client confidentiality – if you didn’t arrange this through us, we may not be able to help. It’s illegal for other brokers to pass client information to us (for example) – for obvious reasons.

Thanks,
Mich

Vote Up0Vote Down  Reply
1 year ago
loriann

I recently got a reverse mortgage – my property taxes were deferred last year – I just paid utilities – am I required to pay what I deferred ?

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Loriann,

Any deferred property taxes would have had to have been paid upon closing for the reverse mortgage. Depending on where you live, however, it might be possible to go back on the deferred taxes list.

Thanks,
Gavin

Vote Up0Vote Down  Reply
1 year ago
Don

Hi, we are considering a reverse mortgage of $75,000.00 and we plan on paying the interest every month, in our case for a 5 year term the interest comes to $27,000.00. Does it start all over again? Does the principal amount of $75,000.00 ever reduce or at the end of the second 5 years if we pay the interest of 27,000.00 again do we still owe the principal amount of $75000?

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Don,

Essentially yes, you are correct. The balance owing after 5 years would be just the $75,000 you originally borrowed and you would continue being charged interest on that amount. You do have the option to make a 1-time payment per year of up to 10% of the balance owing, so you could make the interest payments each month and then make up to a $7500 payment toward the principal and reduce the balance to $67,500 for the next year and reduce your interest payments.

Thanks,
Gavin

Vote Up0Vote Down  Reply
1 year ago
Don

We plan to get a reverse mortgage of $75000.00 and the interest on that for 5 years is $27,500.00, if we pay interest every month and have the interest paid in 5 years, what happens in the next 5 years? Will all the monthly payments be applied to the principal amount going forward?

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Don,

After 5 years, you could either sell the house, pay back the reverse mortgage or renew at a new term and rate. If you renew the reverse mortgage, you would again have the option to either pay or not pay the interest each month, just the same as the first 5 years, however, your rate and therefore payments might change.

Thanks,
Gavin

Vote Up0Vote Down  Reply
1 year ago
Randy Donaldson

I’m only 51 / 52 later this year, does that mean I’m not eligible.

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Randy,

Unfortunately, you do need to be 55 to qualify, but if you give us a call we would be happy to see if we could maybe find another solution for you. You can call us toll-free at 1-888-358-7771.

Thanks,
Gavin

Vote Up0Vote Down  Reply
1 year ago
kelly Harris

If I had a Reverse Mortgage and then received an inheritance; can I pay back the money owed?

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Kelly,

Yes, you can pay back the reverse mortgage at any time. I think you will find this article helpful – https://www.reversemortgagepros.ca/rates-and-penalties/

Thanks,
Mich

Vote Up0Vote Down  Reply
1 year ago
Mike

Am I wrong in assuming there are many ways that you could lose your home with a reverse mortgage, for example, if you had to live in a facility (for health reasons) for more than 12 months? It seems that these are frightening possible results.

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Mike,

As long as the home is your primary residence, meaning you live there for at least 6 months of the year, and you maintain the property tax and home insurance, the bank guarantees that you can stay in the house as long as you want. As long as one of the people named on the reverse mortgage is living in the home, the other can be in a long-term care facility without being forced to sell or payback the reverse mortgage.

Thanks,
Mich

Vote Up0Vote Down  Reply
1 year ago
Claudine

Can you pay the interest charged on a yearly basis; Lets say I get a reverse chip mortgage for $115,000, would I be able to pay the interest at the end of each year? Also, let’s say I come into some money, could I pay off the whole amount of the Chip reverse mortgage at any time?

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Claudine,

Yes, you can pay the interest either every month or on the anniversary of the reverse mortgage funding (rather than the end of the calendar year) Yes, you can pay off the reverse mortgage at any time.

Thanks,
Mich

Vote Up0Vote Down  Reply
1 year ago
Mike cooper

Thanks, this article helps a lot, much appreciated

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Mike,

Glad you are finding our articles helpful!

Thanks,
Mich

Vote Up0Vote Down  Reply
1 year ago
Neil Mackay

WHAT IS THE CURRENT RATE OF INTEREST FOR A PERSON OVER 90
////

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Neil,

Currently, reverse mortgage rates vary from 4.59% – 5.89% depending on the lender and where you live, age has no factor in your rate. To get the lowest rate possible for you you can call us toll-free at 1-888-358-7771 and we will be happy to help you!

Thanks,
Mich

Vote Up0Vote Down  Reply
1 year ago
Ena

1. How do I qualify for the maximum 55% (aside from being 55y over)? 2. Aside from the $ 1,795 adm fee, is there any other fees I have to pay?not to mention my lawyer,property tax,appraisal. 3. Can I choose monthly morg. interest only, and you send me annual mortgage statement activities? 4. When its time to sell, who is to list the house on the market? 5. If I dicharge the mortgage before the term ( I heard its similar from any other banks), but you can you be specific pls. 6. What documents and steps needed to start… Read more »

Vote Up0Vote Down  Reply
1 year ago
Gavin Smith

Hi Ena, These are great questions! 1- The amount you qualify for is based on your age, property value and location. Although 55% of the value of the home is the maximum you can qualify for, not everyone does. We would need to look at your details to determine how much you would qualify for. If you fill out our app for a free assessment, we will be happy to show you. just click this link – Free Assessment 2 – This article on Costs and fees will help with your question! – Costs and Fees 3- You will automatically… Read more »

Vote Up0Vote Down  Reply
1 year ago

Similar Articles

Top 8 Misconceptions About Reverse Mortgages

January 20, 2021

Top 8 Misconceptions About Reverse Mortgages In Canada

There is little doubt that reverse mortgages are one of the most misunderstood financial products in Canada. You might be wondering: where does this misunderstanding come from? Well we already know the answer, it is very simple.  This misunderstanding comes from the U.S.A. We have talked about this many times before and the fact that […]

Read More >

Reverse Mortgage Costs Fees

Reverse Mortgage Costs And Fees

Quite often we get asked the question about what hidden or buried costs there are in a reverse mortgage. This is largely because the whole product can come across of having a feeling of being too good to be true.  Being sceptical like this is a good thing considering how many financial products out there bury […]

Read More >

Reverse Mortgage Line Of Credit

Turning A Reverse Mortgage Into A Line Of Credit

Many people find themselves in the situation where they are deciding between reverse mortgages and a Home Equity Line Of Credit (HELOC). So we thought we would take a look at the pros and cons of both and how you can combine both into a product that we call the ‘Reverse Mortgage Line Of Credit (RM-HELOC)‘. […]

Read More >