8 Short Reverse Mortgage Questions Answered (With Video)
In this article I’m going to answer 8 different common questions on reverse mortgages, each with a very short video explanation.
Here are the questions in order:
- Is a reverse mortgage considered income and it is taxable?
- How is a reverse mortgage repaid?
- How do reverse mortgages really work in Canada?
- Can you use a reverse mortgage to buy a home?
- Can you lose your home with a reverse mortgage?
- What does CHIP mortgage stand for?
- Can you get a reverse mortgage on a Condo?
- Can you get a reverse mortgage if you still have an existing mortgage?
Is a reverse mortgage considered income and it is taxable?
No, a reverse mortgage is considered a loan which is not income & not taxable (like any other loan in Canada). This means that it largely doesn’t impact any Gov benefits or things like that – since these are generally income based. Aside from the video short answer below, you can also read this article and video where I walk through Government benefits in detail explaining how a reverse mortgage impacts every single Government benefit in Canada.
How is a reverse mortgage repaid?
A reverse mortgage is only repaid once all homeowners either pass away or move out of the house (into a care home, for example). The lender will then recover the money that was borrowed plus interest from your Estate. Any money in the Estate can be used to pay it off, a new mortgage taken out to pay it off or the home can be sold to raise funds to pay it off.
How do reverse mortgages really work in Canada?
With a reverse mortgage you can borrow 10% to 55% of your home’s value – based on your age – starting at 55 years old. Instead of paying the mortgage down – like a normal mortgage – there are no payments and the interest is instead simply added to the balance owed. Once you pass away, the lender will recover their money – including the interest – from your Estate. The best way to get the full details on everything involved with a reverse mortgage is to read my free reverse mortgage guide.
Can you use a reverse mortgage to buy a home?
Yes, but you cannot get a pre-approval – so you’ll need to get some quotes to see how much money you can get for the location you’re looking. You also need a large down-payment – for example, if you qualify for a reverse mortgage of 40% of the home’s value, you’d need the remaining 60% as a down-payment from your own funds. I have covered all the steps involved in detail in this article: Using A Reverse Mortgage To Purchase a Home.
Can you lose your home with a reverse mortgage?
No, the house remains your property and you remain on title with a reverse mortgage. Since there are no monthly payments (so no reason for the lender to come after your home), technically a reverse mortgage is safer than a regular mortgage (where you may lose your home for not keeping up with payments).
What does CHIP mortgage stand for?
CHIP stands for Canadian Home Income Plan – it’s what reverse mortgages were first called when they were launched in Canada by Home Equity Bank. Nowadays there are multiple lenders and products in Canada – CHIP is basically now just a brand name for their own reverse mortgage product – kind of like ‘RAV4’ or ‘CRV’ or ‘F150’.
Can you get a reverse mortgage on a Condo?
Yes, reverse mortgages are available on a Condo across most of Canada. Some of the lenders may lend a little less than on a freehold (semi detached or detached) home – depending on your age and location. Otherwise a reverse mortgage on a Condo works exactly the same.
Can you get a reverse mortgage if you still have an existing mortgage?
Yes, but the existing mortgage must be paid off first using the reverse mortgage proceeds. For example, if you have a mortgage of $100,000 and qualify for a reverse mortgage of $250,000 then the first $100,000 would be used to pay off your mortgage and the remaining $150,000 would be yours to keep.
Get A Free Reverse Mortgage Assessment In 90 Seconds
If you’re interested in a reverse mortgage – whether to buy a home or otherwise – I’ll give you a free, professional assessment and advise you if this is a good solution for you, or if something better works.
All it takes is 90 seconds – completely free, no obligation and no hard sales pitch – simply click the link below: ReverseMortgagePros.ca/Assessment
A Canadian Chartered Accountant and licensed Mortgage Professional – creator of Reverse Mortgage Pros – the #1 reverse mortgage specialists in Canada. I make it my mission to educate Canadians about how reverse mortgages work so that you can make an informed and educated decision that’s right for you and your family.
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