Steps To Apply For & Receive A Reverse Mortgage

Deciding on a reverse mortgage is a significant step for many homeowners over the age of 55. The actual process of apply for a reverse mortgage be quite duanting.

This article aims to demystify the process, ensuring you are fully informed every step of the way.

From what paperwork is needed, to the time it takes, and the reasons behind the various document requests, I’ve got you covered.

As always, you can read the article below or watch the video version here:

But First: What Is A Reverse Mortgage?

A reverse mortgage is a financial tool designed for homeowners aged 55 and older, allowing them to access up to 55% of their home’s value without the obligation of monthly repayments.

It’s an effective way to tap into your home equity, assisting in funding your retirement while continuing to live in your home.

Make sure and download my free reverse mortgage guide to get ALL the information you need to know about reverse mortgages in Canada.

Reverse Mortgage Application Steps

The journey to obtaining a reverse mortgage involves several critical steps, each designed to ensure that you’re making a well-informed decision that’s best suited to your financial situation.

Here is everything involved, step by step:

1. Research

Before diving into a reverse mortgage, thorough research is imperative.

Engage with a mortgage professional (like myself) and explore resources like the articles here at ReverseMortgagePros.ca or my YouTube channel where I have dozens of videos to help you.

It’s also important to not just educate and inform yourself on the product but to compare lenders and their products. These can significantly impact your decision, so consider seeking professional advice for this step – lenders can have many hidden or buried costs behind their products and rates.

You can also get a free reverse mortgage assessment where I’ll recommend the right lender and product for you.

2. Apply To The Lender

With the right lender and product identified, the next step is submitting a formal application to the lender themselves.

The application will gather basic information such as your date of birth, address, assets / liabilities and so on – you’ll also give them permission to pull your credit score.

Assets are a fancy accounting word for things you own – your home, cars, cash, stocks or anything like that; liabilities are a fancy accounting word for things you owe – your mortgage, car loans, credit cards or anything like that.

This process involves collecting basic personal and financial information – including pulling your credit score (more on this later) – similar to any other mortgage application.

3. Appraisal

Understanding your home’s value early in the application process is critical, as it directly influences the amount you can borrow.

That is, an appraisal is essential early in the process to determine your home’s value, which is a pivotal factor in the amount you can borrow.

This is why lenders will always perform an appraisal early in the process.

Rather than outlining what is involved in an appraisal, you can check out my detailed article on: appraisals and your initial home value for a reverse mortgage.

4. Gather & Send In Paperwork

Next you’ll prepare to compile and submit various documents.

This can happen before, after or at the same time as step (5) – the mortgage commitment.

The key paperwork you’re going to need is:

  • Property tax statements (and proof it’s been paid)
  • Statements & paperwork relating to any existing mortgage
  • Bank statements and anything to show existing assets
  • Details on any income you have (this may or may not be required – it varies by lender and depends on your particular situation)
  • Identification verification (passport, driving license etc.)
  • Any other requests based on your particular situation

All documents can be scanned and sent in digitally – so you don’t need to worry about mailing things or driving to bring things in person.

5. Review, Sign & Send Back The Commitment

Receiving a commitment from your lender is a pivotal moment.

This document outlines the offer from them (amount, rate, term) and what you need to do in order to be able to receive it – usually providing the paperwork outlined above.

It is a ‘commitment’ from them to lend you the money – as long as you are able to provide certain paperwork. This is why steps (4) and step (5) often happen at the same time.

Signing it back does not commit you to a reverse mortgage or mean it’s a done deal – it just means you are accepting their offer as it stands.

The actual formal signing of the mortgage will come in a later step.

Signing and sending this back just means you are ok with their initial offer and willing to continue the process.

Again – this is the same as with any mortgage in Canada.

6. Independent Legal Advice

Consulting with an independent lawyer is a unique step for getting a reverse mortgage that you don’t have to do with most other mortgages in Canada.

You’re required to get independent legal advice by all the lenders (and some Government regulations in certain Provinces in Canada).

You’ll meet with a lawyer, review the commitment, other paperwork from the lender or anything else you want to – asking them any questions you have and ensuring you’re happy with it all.

7. Legal Signing

This is the formal signing and final acceptance of your reverse mortgage.

This isn’t with your independent lawyer but a real estate / mortgage legal company who will create the paperwork that indicates you are securing a reverse mortgage against your home.

The most commonly used ones are FCT and FNF.

Again – this is the same as with any mortgage in Canada. In fact, these companies do the signing and processing of a large number of mortgages in Canada.

8. Closing Day & Receiving Funds

In the paperwork you’ve signed you’ll have picked a ‘closing day’ – which is the day that the reverse mortgage is completed on.

On this day, any existing mortgage you have will be paid off and you’ll receive the funds – whether as a lump sum of the first of your monthly payments (or both).

Interest accrues from this point onward – but only on the portion that you actually withdraw and take out.

And that’s it – your reverse mortgage has funded!

Timeline

Expect the process to take between 2-6 weeks, though it’s advisable not to rush.

Allowing 4-6 weeks or more makes sense – so that you don’t rush through everything.

If you have an existing mortgage that you’re looking to pay off, my advice is to begin the process 3 months before your mortgage is due to be renewed.

Credit Score & Income

A common question is: “why do lenders pull your credit score and do income verification when these are not part of the key qualification criteria?”.

Firstly, a reverse mortgage is still a loan and mortgage product – so they are required to do this by regulations and regulatory bodies in Canada.

Secondly, the biggest concern of a reverse mortgage lender is your ability to pay property taxes.

So while income isn’t a key criteria they are required to pull your credit score by regulations and they will generally want to examine your income (sometimes not) in order to assess your ability to pay your property taxes.


Summary – Applying For And Receiving A Reverse Mortgage

Securing a reverse mortgage is a very similar process to getting any mortgage of any kind.

The only difference and only step you’ll go through that’s different to a regular mortgage (or any loan of any kind) is the step for independent legal advice.

My advice is to allocate 4-6 weeks (or more) to navigate through everything without having to rush.

Remember, this isn’t free, easy money – some paperwork and documentation is still required – these are regulated mortgages and loans.

The most important step is to get good advice and do your research – and on that note:

Free Professional Reverse Mortgage Assessment

If you’re considering a reverse mortgage and would like a free assessment – by a Chartered Accountant and the #1 Reverse Mortgage Broker in Canada – to recommend the right lender and product, as well as advise if this is the right solution for you, you can do so here:

Get A Free Professional Reverse Mortgage Assessment

This service is completely free and there are no pushy sales pitches – I simply provide the information for you and let you decide if it’s something you want to pursue.

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