Reverse Mortgages: A Post-Retirement Option to Access Your Wealth

Reverse mortgages are becoming a more popular option for older Canadians looking to preserve their purchasing power or bulk up their retirement savings in a red-hot Canadian real estate market — without leaving their home.

A reverse mortgage is a type of loan available to seniors (i.e., those 55 and over) that allows them to access the value of their home without having to sell the property. In other words, a reverse mortgage is like a traditional mortgage, but instead of making a cash downpayment and taking out a mortgage to buy the home, they are using the equity in their home to withdraw cash. With a reverse mortgage, the homeowner still maintains ownership of their home while drawing on the equity they have built into it by borrowing against it. Think of it like an advance payment on your home equity.

Depending on their age, where they live, and type of home, the homeowner can borrow up to 55% of the current value of their home. Borrowers can choose to receive a lump-sum loan or regular infusions of cash payments — all tax free.

Seniors in Canada are a demographic sitting on more than $1 trillion of wealth in their homes, but many aren’t able to maintain the same standard of living they had pre-retirement. A recent report by the National Institute of Ageing (NIA), in collaboration with HomeEquity Bank, highlights that 79% of baby boomers believe current government-run and regulated retirement savings plans, such as Registered Retirement Savings Plans (RRSPs), Canada Pension Plan/Quebec Pension Plan (CPP and QPP), and Old Age Security (OAS) do not provide adequate savings to prepare for a comfortable retirement.

Everything You Need To Know About Reverse Mortgages


According to Ben McCabe, the founder of Toronto-based fintech Bloom Finance Company, reverse mortgages may be the answer for many older Canadians looking to boost their quality of life and standard of living and align these with their true net worth, much of of which is tied up in the value of their home.

McCabe describes reverse mortgages as a “really powerful product for 55-plus Canadians who own their homes, have a lot of wealth built up in their homes, but need additional liquidity to address the various costs and opportunities that arise.”

What Can Reverse Mortgage Funds Be Used For?


The funds from a reverse mortgage are at your disposal to use on whatever you wish: from home retrofits and renovations, to helping your adult children with their own home purchase, to travelling.

Eligibility Requirements for a Reverse Mortgage


The process of accessing a reverse mortgage is fairly straightforward: the 55-plus borrower must own a home (either paid off completely or usually at least 50% of the property’s value). Reverse mortgages require no monthly principal or interest payments, instead accruing interest over time. The balance is only payable when a homeowner borrower moves out, sells the home, or passes away (if the borrower has a spouse or there is someone else entitled to the home, the mortgage stays in place). The homeowner simply needs to make sure they pay their property taxes and insurance on time. Any appreciation in the value of the home belongs to the borrower, not the lender, making it an attractive option for those who want to continue benefiting from the rapidly rising home prices.

Reverse Mortgages Nowadays


Reverse mortgages have been around since the 1980s, when they were expensive due to steep interest rates and consequently out of reach for many homeowners. Dramatically reduced interest rates on reverse mortgages have made these a more accessible financial product today. Recent statistics from the Office of the Superintendent of Financial Institutions show an increasing appetite for reverse mortgages, especially during the COVID-19 pandemic and associated housing boom.

McCabe launched Bloom Finance to fill “a need in the market for a modern and customer-centric company to help 55-plus Canadians seamlessly and comfortably access that wealth that they built up in their homes.” Following a soft launch in select Ontario markets over summer 2021, the Bloom Reverse Mortgage is now available across the province.

McCabe’s goal is to make home equity as accessible as other retirement wealth accounts like an RRSP. According to the fintech leader, this involves radically simplifying the process of accessing the equity in the home, and innovating around how, where and how much equity can be accessed.

Frequently Asked Questions About Reverse Mortgages


What’s a reverse mortgage?

A reverse mortgage is a type of loan available to seniors (i.e., those 55 and over) that allows them to access the value of their home without having to sell the property. In other words, a reverse mortgage is like a traditional mortgage, but instead of making a cash downpayment and taking out a mortgage to buy the home, they are using the equity in their home to withdraw cash.

What percentage can you borrow on a reverse mortgage?

Depending on your age, where you live, and type of home, the homeowner can borrow up to 55% of the current value of their home. Borrowers can choose to receive a lump-sum loan or regular infusions of cash payments — all tax free.

What are the eligibility requirements of a reverse mortgage?

The process of accessing a reverse mortgage is fairly straightforward: the 55-plus borrower must own a home (either paid off completely or usually at least 50% of the property’s value). Reverse mortgages require no monthly principal or interest payments, instead accruing interest over time. The balance is only payable when a homeowner borrower moves out, sells the home, or passes away (if the borrower has a spouse or there is someone else entitled to the home, the mortgage stays in place).

How do I pay back my reverse mortgage?

Reverse mortgages require no monthly principal or interest payments, instead accruing interest over time. The balance is only payable when a homeowner borrower moves out, sells the home, or passes away (if the borrower has a spouse or there is someone else entitled to the home, the mortgage stays in place).

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Mashoka Maimona

Mashoka is a journalist for the London Press and the National Post, currently specializing in finance, business and technology.

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