As reverse mortgages boom in popularity, here’s what you need to know
Reverse mortgages are seeing a surge in recognition as extra Canadians search to age in place and complement their revenue amid the continuing affordability disaster.
HomeEquity Bank, Canada’s largest reverse mortgage supplier, reported that in 2022, it had issued over $1 billion {dollars} in reverse mortgages, which is up 30 per cent from 2021.
“A lot of people who are retired fall into a position where they’re house rich and cash poor. So especially if they don’t have any sort of defined pension plan or if they haven’t invested heavily in RRSP… that’s when a reverse mortgage comes in handy,” Toronto-based mortgage dealer Mary Sialtsis instructed CTV’s Your Morning on Thursday.
Sialtsis says the rise in Canadians looking for reverse mortgages is unsurprising, particularly after the horror tales popping out of long-term care houses with COVID-19.
“A lot of seniors are rethinking their plans about aging in place rather than going into retirement facilities,” she instructed CTV’s Your Morning on Thursday. “Some of them do need help with assistance while they’re living, and they can’t afford it. So a reverse mortgage is a great option.”
Reverse mortgages function equally to a house fairness line of credit score. Canadians 55 or older who personal a paid-off house can borrow in opposition to their house fairness to complement their pension earnings, whereas having the ability to proceed residing in their very own house.
“I have several clients that have used it, who are retired and they don’t have private pensions. So they’re only earning CPP, and OAS which really doesn’t give them a lot of money,” Sialtsis mentioned. “They want to kind of supplement their lifestyles, so they’ll take a reverse mortgage.”
Unlike typical mortgages or traces of credit score, reverse mortgage recipients needn’t pay again the cash till each of the householders die, transfer out or promote their home.
Even if one house owner strikes to a retirement facility, the opposite can proceed to stay of their house and obtain the reverse mortgage. If each householders die, their property must pay again the mortgage inside 180 days, which is usually achieved by promoting the home.
There are additionally limits as to how a lot you possibly can borrow in opposition to your house.
“The most you can borrow against the value of your home is 55 per cent. What’s important to note is that the percentage that you can borrow from the home is based on how old you are. So somebody who is 57 might only be able to access about 20 per cent of the value of the home,” Sialtsis defined.
But irrespective of how a lot you borrow in opposition to your house, you’ll by no means lose possession of your house with a reverse mortgage.
“The owners never lose ownership of the home. That is key. They always stayed the home owners and it is simply a mortgage that they’re getting,” mentioned Sialtsis.
