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According to recent research, 79% of Canadians over the age of 65 own their own home, and rapidly increasing property prices mean that many of these homeowners have the option to access the equity built up in their home, without having to sell it, via a reverse mortgage.
This can be a valuable way to access cash, so let’s take a look at exactly how reverse mortgages work. So here’s everything you need to know if you’re hoping to benefit from the equity in your home, and the top reverse mortgage providers in Hamilton that can help.
A reverse mortgage is a form of loan secured against your property, that releases the equity you have built up in your home in the form of cash. But as opposed to a normal mortgage, a reverse mortgage lasts the duration of your life, not a set term, and there are no repayments, for principal or interest. You do not pay anything for the loan until it terminates, at which point the loan must be fully repaid. Because of this, it acts exactly reverse to a standard mortgage – accruing value over time, instead of growing smaller.
Eligibility for a reverse mortgage is simple:
If you meet these basic requirements, you are technically eligible for a reverse mortgage.
However, as with other types of mortgage, financial factors will be taken into account to see whether your chosen lender wishes to lend to you. These factors include:
At the moment, there are only two reverse mortgage providers across all of Canada:
2. HomeEquity Bank (CHIP)
3. Equitable Bank
Getting a reverse mortgage is fairly easy:
Once you have a reverse mortgage on your home, there are some basic rules you must follow to stay in line with the loan’s stipulations. These are:
If you fail to meet any of these conditions, you will default on the loan.
There are a couple of ways to close a reverse mortgage:
The amount of time you, or your estate, have to repay the loan varies by lender and circumstance.
Not everyone is eligible for, or wants to get, a reverse mortgage, and fortunately there are some other options available to help homeowners benefit from the equity in their homes:
There are quite a few misconceptions about reverse mortgages, which often make them seem less preferable to other financing options. Some of these misconceptions include:
Given the specifics of reverse mortgages, it’s worth knowing a little about Hamilton’s property market and its typical homeowner:
There are only two reverse mortgage providers in Hamilton: HomeEquity Bank and Equitable Bank.
Anyone in Hamilton who is 55 years or older (about 30% of the population) and owns their own primary residence can get a reverse mortgage.
You can borrow up to 55% of your home’s value with a reverse mortgage. This averages $438,136 in Hamilton.
Reverse mortgage interest rates start at about 3.5%, but do vary depending on the term of the loan and some other factors. As well as this, there will be mortgage origination fees and legal fees associated with the loan.
Interest accrues on your loan as it is received – so opting for monthly payments means less interest over the life of the loan. This is one way you can make your reverse mortgage a little cheaper; another is by repaying the loan in partial payments over time.
Reverse mortgages can be taken out on any privately owned home, as long as it meets the lender’s criteria and is the borrower’s primary residence. If the property has multiple owners, then all of the owners must meet the lender’s requirements.
No, reverse mortgages do not affect benefits, as income from a reverse mortgage is tax free.
If you own your home with your spouse, the reverse mortgage is maintained after they pass away. For the reverse mortgage to close, both spouses need to pass away or vacate the home.
