Reverse Mortgages – What Are They And How Do They Work?
Reverse mortgages are for the 55 and older crowd.
You may not know the benefits of a reverse mortgage, sometimes referred to as a CHIP (Canadian Home Income Plan) mortgage. Let us help you understand what reverse mortgages are, and how they work.
Reverse mortgages are designed specifically for Canadian homeowners who are 55 years old or older, who don’t want to service a loan over time, or have concerns about their financial position in the future.
Reverse mortgages have been available in Canada for over 25 years and provide an excellent way to supplement ones income on an ongoing basis thereby providing additional financial freedom to enjoy your retirement.
One amazing feature about reverse mortgages is that it only has to be repaid when your home is sold, either by yourself, or your estate. The estate can choose to repay the loan from the proceeds of the sale of the property, or to place a new mortgage on the property. After the loan is repaid, all of the remaining equity goes to your estate or heirs.
A critical thing to understand is that you do not give up ownership of your home. Just like a traditional mortgage, a reverse mortgage is registered on title, but your home always remains in your name.
In a nutshell, reverse mortgages can be a great option for anyone looking to stay in their home and remain independent, all the while maintaining financial freedom.
The key points with reverse mortgages are:
- You must be 55 or older to qualify.
- Appraisal is required to determine fair market value of your home.
- Mortgage is based on equity within the home, amount of secured debt, location and type of property.
- You can choose to access a fixed amount each month or a lump sum payment.
- Tax-free source of income: This income does not affect the Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be receiving.
- Interest rates are higher than traditional mortgages.
- The equity amount decreases (as you are not making monthly payments) as interest owing accumulates.
If you’d like to discuss the opportunity of a reverse mortgage, please give us a call 403-509-2434. We are happy to sit down and review your options anytime.