Everything to know about reverse mortgages in Canada: How they work, how to qualify, the pros and cons, and what your options are.
What Is a Reverse Mortgage?
A reverse mortgage is a loan secured against your home that doesn't require any regular payments and is an easy way to access home equity.
You can borrow up to 55% of your home value, tax-free.
You do not have to repay the mortgage until you and your spouse move, sell the property, or pass away.
Reverse mortgages allow you to:
Pay off your existing mortgage
Pay off debt
Pay for home improvements
Stay in the home you love
Live more comfortably without mortgage payments
Get the most out of retirement
You continue to own your home 100%, and there are no restrictions on how the reverse mortgage funds can be used.
How Does a Reverse Mortgage Work in Canada?
With a reverse mortgage, Canadian homeowners are able to borrow up to 55% of the value of their home, tax-free.
If you currently have a traditional mortgage on your property, your new reverse mortgage can pay that mortgage off, plus give you additional money to pay off other debts or use however you want.
If your home is mortgage-free, you can access up to 55% of the value and receive the full amount directly into your bank account.
Instead of making regular payments, interest owing accumulates and only needs to be repaid if you move, sell, or pass away. Plus, you always continue to own 100% of your home. What is left owing when you sell or move is your principal mortgage amount plus the accumulated interest.
Reverse Mortgage Illustration
If you want to find out how the numbers could look for you, let us know and we'll run a reverse mortgage calculator for you to review.
How to Qualify for a Reverse Mortgage in Canada
In general, reverse mortgages are only available to those who are 55 or older. However, some lenders do not require that you be 55 to qualify.
How much you qualify will be based on your current age and the value and location of your home.
The property must be your primary residence and can be a free-hold home or a condo.
For retirees, reverse mortgages are a great option since they do not require you to be earning employment income to qualify.
You can apply for your reverse mortgage over the phone, in person, or using our secure online application. To get started, fill out the form on this page.
How Much Money Can You Get With a Reverse Mortgage?
The amount of money you can get with your reverse mortgage can be as much as 55% of the value of your home with most reverse mortgage lenders.
One of the lender’s conditions of your reverse mortgage approval will be that we order an appraisal on your property to confirm the value.
Ultimately, how much you can get with a reverse mortgage will be determined by your current age and the value of your home.
How Do You Pay Back a Reverse Mortgage?
Paying back a reverse mortgage works the same as paying back any mortgage. It can be paid back when you sell your home, or you can refinance and pay it off with the new mortgage replacing it.
What if I’m Under 55 Years of Age?
There are some lenders that offer reverse mortgages with no age limits or restrictions. To find out your options, get started by filling out the form on this page.
Pros and Cons of Reverse Mortgages
Pros / Advantages of a Reverse Mortgage
Allows seniors to access home equity easily.
Employment income is not required to qualify.
Credit score has minimal importance in qualifying.
Competitive, fair, and friendly interest rates.
Will not affect your Old-Age Security or the Guaranteed Income Supplement.
Receive your money as a lump sum or as recurring deposits into your bank account.
You continue to own 100% of your home.
No repayment is required until you leave your home.
No negative home equity guarantee is offered by some lenders.
Stay in your home without needing to move, sell, or downsize.
Pay off debts and improve monthly cash flow.
Live more comfortably with no more mortgage payments.
Cons / Disadvantages of reverse mortgage
Interest rates are a little higher than traditional mortgage rates.
There is a potential for less home equity to be left available for your heirs to inherit.
Repaying the loan may complicate the settling of an estate if all homeowners die.
Set-up fees and closing costs may be higher than with traditional mortgages.
There may be an early repayment penalty if the loan is repaid in the first five years.
Reverse Mortgage Lenders
There are multiple reverse mortgage lenders to choose from in Canada. Each offers similar products with a competitive interest rate. As your mortgage broker, we will present you with your options and give our unbiased opinion and advice.
At various times of the year, one lender may be a better choice than another depending on available interest rates and current promotions. Some lenders may approve for a higher amount than others depending on the location of the property.
CHIP Reverse Mortgage
Previously called the Canadian Home Income Plan, the CHIP Reverse mortgage is offered by HomeEquity Bank. HomeEquity Bank is a federally regulated Canadian bank founded in 1986 which focuses exclusively on reverse mortgages.
Equitable Bank Reverse Mortgage
An Equitable bank reverse mortgage is similar to the HomeEquity Bank reverse mortgage. Equitable bank offers competitive rates and is a good alternative to a CHIP reverse mortgage. The company was founded in 1970 and offers a wide range of mortgage products, not just reverse mortgages.
Bloom Reverse Mortgage
Bloom specializes exclusively in reverse mortgages for 55+ Canadians. Bloom was founded in 2019. A Bloom reverse mortgage can be another great option to consider.
Reverse Mortgage Rates
With several lenders offering reverse mortgages, interest rates are fair and competitive.
Interest rates regularly change based on the Canadian Prime Lending Rate and the bond market.
Occasionally, lenders introduce promotional rates to help them capture more business. Other times, they increase rates to make themselves less competitive once they've reached their capacity for taking on new loans in a given period.
Fixed-rate and variable interest rates are available. As your mortgage broker, we will help you find the most cost-effective option that meets your financial goals.
Reverse Mortgage Costs
Costs can be paid from your reverse mortgage proceeds and don’t need to be an out-of-pocket expense.
Typical Reverse Mortgage Costs Include:
Appraisal fee (approximately $350-$600)
Legal fees charged by your lawyer for independent legal advice and closing costs (approximately $1800)
Set up fee (approximately $995-$1800 depending on the lender)
In addition, there may be an early pre-payment penalty fee if you pay off the reverse mortgage within the first five years.
Alternatives to a Reverse Mortgage
One alternative to reverse mortgage loans is simply getting a traditional mortgage with regular payments. If you have the credit and income to qualify for a traditional mortgage it may often be a better route for consolidating debt or accessing home equity for other purposes.
Reverse Mortgage vs HELOC
Home equity lines of credit (also known as a Secured Line of Credit) are also a potential alternative. With a home equity line of credit, you can access as much as 65% of the property value. Monthly interest-only payments are required.
Reverse Mortgage vs Private Mortgage
A private mortgage is another alternative way to get a home equity loan. With a private mortgage, the term is typically shorter and there are higher fees to set them up. The typical mortgage term length is one year, and money is set aside to pre-pay all mortgage payments for that term so that no regular payments are required throughout the year.
Private lenders are available and can provide second mortgages behind your reverse mortgage if additional money is needed.
Why Use Us as Your Reverse Mortgage Broker?
As your mortgage broker, we work for you, not the lender. We present you with multiple options and provide you with unbiased opinions.
In most cases our service is free. We get paid by the lender, and only after your mortgage funds. When the situation calls for it, a brokerage fee may apply, but we will always let you know in advance.
We have been mortgage brokering in Ontario, Canada since 1999 and have a 5-star rating on our Google business listing.
Our promise to you is to listen carefully, speak clearly, respect your privacy, provide helpful information and advice, and never pressure you.
What Is the Process?
Get started with us today by filling out the form on this page. We are often in touch within 5 minutes of receiving the notification on our end. Or feel free to call us to speak right now.
We will gather some information from you and learn about your goals and your situation.
Your application information can be provided through our secure online mortgage application, or over the phone. We rarely meet in person with our clients, but if you are interested in meeting at our Waterdown office, we are happy to do so.
Once we have your information and understand your goals we will provide you with the options available to you and give you advice and guidance.
We will answer all your questions in detail so you’re comfortable the entire time and outline everything, so there are no surprises.
Once you’re ready to proceed we will order the appraisal, send you mortgage documents for signing via DocuSign, and collect any remaining documents from you that we require to have a complete file.
The final steps will be to have a signing appointment with your lawyer. We can even choose a lawyer that does virtual signing appointments so you never have to leave the comfort of your home.
On the scheduled closing date your new reverse mortgage will be used to pay off your existing mortgage and/or any debt we’ve arranged to be paid out. The remaining money deposited into your bank account.
Get started today and learn your options! There is no cost or obligation.
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