Reverse Mortgage Information Center

A reverse mortgage is a type of residential mortgage intended for retirement planning. In Canada, households and couples have to be 60 years old or older, and this is the minimum age requirement. There are no credit or income requirements in place as part of the application process.

A reverse mortgage is a good choice for persons who have paid off their mortgage loan or have a small portion of it to repay. Persons who meet the eligibility criteria obtain mortgage financing in the amount of 10 to 40 percent of their home’s fair market value but less that any charges that are outstanding.

To get financing, applicants for a reverse mortgage should occupy and own a house. They should live there after being approved for a mortgage loan. In the event of death of one of the spouses, the mortgage continues until the other spouse passes away or sells the property.

Applicants can receive mortgage advances in the form of payments over time or as a lump sum. Borrowers can rent out their property to get additional funds but only for short periods of time. One advantage of reverse mortgages is that proceeds are tax-free Therefore, seniors who receive revenue from the mortgage do not pay tax. It is their money and home, and they already paid tax on the latter. Technically speaking, this is not classified as income as the non-cash equity is converted into cash.

Seniors can use the funds for different purposes – they can pay back debts, help family members, do home improvements, or invest the money. The money can be used for anything, even for going on a holiday. The reverse mortgage is a mortgage loan that gives seniors a sense of security. Funds are available without having to sell one’s home.

It should be noted that a reverse mortgage is not always recommended as the right solution. You may want to take a line of credit, if you have a good income, excellent credit, and high net worth. You may have various sources of income without having to borrow. On the other hand, applying for a reverse mortgage makes sense if you live on a fixed pension and do not have other sources of income. You do not have to make monthly payments which improves your cash flow.

There are additional benefits apart from this. First, it is easy to qualify for it given that many Canadian seniors have a considerable equity in their houses. Because of this, the eligibility requirements do not include income or credit score as part of the qualification process. You cannot be evicted because you are a homeowner. You have the right to live in your house until you sell it, move out, or pass away.

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