Reverse Mortgage

• Your age (most institutions require the youngest borrower to be at least 55 years old)
• Your home’s appraised value, condition, and type
• Financial eligibility criteria set by the lender

With a reverse mortgage, you no longer need to pay for the loan until it’s due. However, if you want to move out or sell the home, you will be required to make payments. As you go along without making payments, your interest increases, and this may result in reduced equity in your home.

How a reverse mortgage works

Most homeowners will use the money they get from a reverse mortgage to pay off any outstanding loan or lines of credit that they took using their home. The remaining amount from the reverse mortgage can be used for long term projects such as home renovations or even to repay high-interest debts.

Keep in mind that after taking the reverse mortgage, you may not qualify for other forms of financing that are secured by your home, such as a HELOC. Once you qualify for the reverse mortgage, you have two payment options. What you choose will depend on how you’d like to access the funds.

• You can take the funds one-time as a lump-sum
• You can access different amounts over time

There could be restrictions or fees charged by your lender when taking a reverse mortgage. Ask questions to understand the terms of your loan and avoid surprises.

Are you eligible for a reverse mortgage in Toronto?

Lenders have different eligibility criteria for reverse mortgage applications. Typically, the applicant must be a homeowner of at least 55 years of age. If you have more than one name on your home’s title, these individuals must also meet the eligibility criteria.

You will need to get a legal professional to provide independent advice when making this application. Most lenders will ask for proof that you obtained this advice before moving forward with your application.

Note that you can only take a reverse mortgage if you live in the home as your primary residence. This often means that you must prove that you live in the home for at least six months a year. You must also have sufficient equity.

Different situations could be termed as a default of your reverse mortgage.

• If the funds are used for anything illegal
• If you provided false information in your application
• If you neglect your home or poor maintenance that lowers the property’s value
• If you fail to follow the stated conditions in your reverse mortgage contract

It’s important to ask your lender to clarify what would be termed as a default when submitting your application.

In the event of death, most lenders will require that the reverse mortgage Toronto be repaid using your estate unless there are other individuals in the title who are still alive.

The time given to repay the funds after the death of the last borrower will be stated in your contract. Typically, lenders provide a period of 180 days to pay the funds in the event of death. However, for homeowners who move into long-term care, the lender can extend the repayment period to 1 year.

Understanding this timing is very critical as it helps you to prepare for such scenarios.

Equitable Bank:

Offers reverse mortgages through brokers across different Canadian provinces like Quebec, Ontario, and Alberta.

HomeEquity Bank:

Offers the CHIP reverse mortgage also through mortgage brokers across Canada.

It’s important to review what both options have to offer before you sign up for any. You may also want to explore other alternatives to getting a reverse mortgage, such as:

• Taking a personal loan or line of credit
• Selling your home and replacing it with a smaller home
• Renting
• Moving to assisted living

• You don’t need to make regular payments on the loan.
• You can access funds using your home’s equity without selling it.
• You don’t pay taxes from any funds you receive from the reverse mortgage.
• You still own your property.

• You can choose when and how to access the funds.
• Your eligibility for benefits such as Old Age Security (OAS) or Guaranteed Income Supplement (GIS) is not affected after taking this mortgage.
• It’s easy to access and qualify for without the usual standards of a traditional mortgage.

• Interest rates are typically higher than most traditional mortgages and HELOCs.
• If you pass away, the remaining funds have to be repaid within a set time. This could reduce the value of your estate significantly and cause your beneficiaries to suffer.

• There are additional costs associated with a reverse mortgage that make it even more expensive than the conventional type.
• Your home equity depletes as you borrow more, and you end up paying even higher interest rates.