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London is one of Canada’s fastest growing cities, and home to booming property and loan markets. The combination of affordable housing (in comparison to other areas in SW Ontario), excellent hospitals and transit, and its ideal location (equidistant to Toronto and Detroit), makes London a great bet for long term home ownership.
But those with equity tied up in their London home and in need of cash do not have to sell in order to make ends meet. Reverse mortgages allow Londoners to access much-needed funds without the hassle of moving. On this page you will find the top reverse mortgage providers in London and all about how they work. Let’s begin!
A reverse mortgage is a form of loan that in effect ‘releases’ the equity you have built up in your home. As with normal mortgages, the loan is secured against the property in question. However, as opposed to a normal loan term, a reverse mortgage lasts the duration of your life, not a set term, and there are no repayments, for principal or interest, at all during the loan’s life. You do not pay anything for the loan until it terminates. Because of this, it acts exactly reverse to a standard mortgage – accruing value over time, instead of growing smaller.
Reverse mortgages are very useful if you have built equity in your London home but lack regular income. The funds released via a reverse mortgage are tax free, so there are no payments to worry about until the home is vacated.
There are no restrictions on how you can use funds from a reverse mortgage, but there are some common uses:
Eligibility for a reverse mortgage in London is simple:
If you meet these basic requirements, you are technically eligible for a reverse mortgage. However, as with other types of mortgage, other personal financial factors will be taken into account to see whether your chosen lender wishes to lend to you.
At the moment, there are only three reverse mortgage providers across all of Canada:
2. HomeEquity Bank (CHIP)
3. Equitable Bank
London’s average house price is $607,431, so many reverse mortgage applicants in London will meet the home value requirement for both providers very easily.
Getting a reverse mortgage is a fairly easy process:
If you are approved, you can choose to take your mortgage funds either as a single lump sum, or split between a small upfront payment and monthly payments.
The lack of reverse mortgage providers means that there is less competition than in the traditional mortgage market, and so interest rates are higher than you might expect. Rates can vary depending on your circumstances and your chosen mortgage term, but they start from around 3.5% (fixed rate). Variable rates are also available. It’s important to note that interest accrues on your loan as it is received – so opting for monthly payments means less interest over the life of the loan. One other way you can make your reverse mortgage a little cheaper is by repaying the loan in partial payments over time.
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.
Given the specifics of reverse mortgages, it’s worth knowing a little about London’s property market and its typical homeowner:
Anyone in London who is 55 years or older and owns their own primary residence can get a reverse mortgage. If you co-own your home, all owners must be 55 or older.
You can borrow up to 55% of your home’s value with a reverse mortgage. This averages $334,087 in London.
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.
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.