As Canada’s largest reverse mortgage brokerage, we deal with reverse mortgages everyday. It could be easy to think that everyone knows as much about reverse mortgages as we do but we really try hard not to make that mistake.
And so, whenever we start talking to anyone about the possibility of getting a reverse mortgage, we try very hard to make the process transparent, understandable and eventually, tailored to their needs.
But more people nowadays are doing online research about reverse mortgages before they call us. So to all of those people, this article is for you—here are the 10 steps to apply for a reverse mortgage!
Hopefully, this article will make you feel more comfortable with the reverse mortgage process and remove some initial concerns about contacting us.
Reverse Mortgages Overview:
- Only for homeowners aged 55 or older
- Access up to 55% of the equity in your home
- Regular payments not required, only for your primary residence
- Tax free cash, improve monthly cash flow
Step 1: Initial Telephone Discovery Call
Your journey begins with a friendly, informative telephone call with a licensed reverse mortgage specialist at RetireBetter specialist.
This conversation is crucial as it allows us to understand your unique needs, answer any questions you may have, and provide you with an overview of what to expect throughout the process.
Our objective during this call is to make sure you are suitable for a reverse mortgage and vice versa.
This initial call can range from 15 minutes to up to an hour, it really depends on how comfortable you feel and how many questions you may have at this stage.
The call ends with the simple question: Do you want to think about what we’ve discussed or would you like to start the process and complete a reverse mortgage application?
Remember, there is no pressure to rush through any of the steps, we want to proceed at a pace that is comfortable for you.
Step 2: Complete Application and Review Credit
When you’re ready for the next step after our initial discovery call, we start to gather information about you and your financial situation.
This is also done over the telephone, and we ask you questions about your income sources, your credit and your home.
None of the questions are very difficult and we often work with your best guess information, so there’s no pressure to be exactly correct on your answers. We can easily change the figures later on if necessary.
As part of this step, we do get your verbal consent to pull your credit bureau as this is a requirement for all reverse mortgages in Canada. With reverse mortgages though, it’s more of a formality as most reverse mortgage lenders, such as HomeEquity Bank and Equitable Bank, do not have a minimum credit score requirement.
We use the credit bureau to get a better understanding of your financial situation: are you behind or current in your debts? Have you filed for bankruptcy in the past? Do you have collections or judgments?
From your answers to our questions and a review of your credit bureau, we are able to quickly understand your suitability for a reverse mortgage.
This step usually ends with another opportunity to answer your questions and setting a time for our next call with you, which is when we have an initial quote for you from a lender. This second call is usually 1-2 business days after we’ve taken your application.
Step 3: Underwriting and Submission
After we have completed the application with you, we send your application to our underwriting team who will review your file and submit it to a reverse mortgage lender that aligns best with your needs.
Our underwriters consider various factors, including loan terms and interest rates, to ensure you receive the most beneficial offer available. Once we have received a lender response and have an initial quote on hand, we move on to the next step!
Step 4: Initial Quote Review
During this call, your dedicated specialist will discuss the initial quote, reviewing pricing, loan amount, and other lender conditions such as loan payouts and title issues.
This step is collaborative; we’ll work together to decide on a fixed or variable rate, the initial term, and whether you prefer to receive all funds upfront or as installments, tailoring the loan to your preferences and needs.
All mortgage lenders (and this is not just limited to HomeEquity Bank or Equitable Bank) have slightly different requirements to proceed to the next step: some want a simple response from us, others may want a sign-back of the initial quote, some want some variation of both.
Regardless, we confirm to the lender that you want to proceed and we give them the details about the requested loan amount, the term and the interest rate selection you have made.
Step 5: Appraisal
Whether you are getting a CHIP Reverse Mortgage, a Flex Reverse Mortgage or a reverse mortgage from any of our other lenders, an appraisal will be required.
The appraisal is a thorough evaluation of your property which involves a site visit by a licensed property appraiser. The appraiser will walk inside and outside your property and will take notes and pictures for their report back to the lender.
This step is crucial as it determines the value of the property, which in turn affects the final loan amount.
We’ll arrange the appointment at a time that suits you, and give you suggestions on how to prepare for the visit. The typical appraisal costs between $300-$500 and is the only charge you must pay out of pocket.
It takes typically 5-7 business days for an appraisal report to be completed after the site visit has been completed.
Step 6: Document Collection
Before the appraisal report is completed, we will send you a list of documents that we will need for you to provide to us.
These documents are standard for any mortgage transaction and consist of the following:
- Copies of identification for all homeowners
- Copy of recent property tax statement
- Copies of any powers of attorney (if applicable)
- Copies of any lease agreements (if applicable)
- Copies of death certificate (if deceased still on title)
- Copies of payout statements (if conditioned to be paid by the lender)
We’ll also get the details of your real estate lawyer or help you find one in your area. This lawyer will arrange for the registration of your CHIP reverse mortgage or your Flex reverse mortgage at the final stage.
Whether you get a CHIP reverse mortgage or a Flex reverse mortgage, you will also need to find a second lawyer who will provide you with independent legal advice (ILA) before you finally sign the reverse mortgage paperwork.
The ILA lawyer typically charges $300 for their session with you and this amount can be paid out of pocket or at a later time. We discuss the ILA lawyer’s role below in Step 9.
Step 7: Document Review and Approval
Your dedicated reverse mortgage specialist and the RetireBetter underwriter will review all documents that you have provided and will arrange for these documents to be sent to the reverse mortgage lender for their own approval.
The lender will review the submitted documents and the appraisal report to ensure there are no issues with the condition of the property.
They may approve the application or request further information.
You don’t need to be overly concerned with this step as RetireBetter has extensive experience dealing with document and property issues when it comes to arranging reverse mortgages.
We’ll usually be able to manage all of the issues without your involvement—that is the benefit of working with a reverse mortgage broker! Nonetheless, your advisor will stay in touch with you and provide you regular updates.
During this stage, we will discuss when you want to legally complete the transaction, known as a “closing” and receive your funds from your CHIP reverse mortgage or your Flex reverse mortgage.
Step 8: Reverse Mortgage Agreement
Once all of the documents and the property appraisal report have been approved by the reverse mortgage lender, they will issue a final loan agreement, known as a commitment.
Along with the reverse mortgage agreement, they will also include a reverse mortgage disclosure form that will clearly state the following:
- The length of your reverse mortgage term
- The applicable interest rate, and its APR
- The lender setup fee
- Your obligations as a borrower
- Their obligations as the lender
- Their complaint resolution process
We will review all of the documents issued by the lender and will arrange for them to be sent to your ILA lawyer.
Step 9: Independent Legal Advice (ILA)
Meeting with an independent lawyer is a pivotal step in the reverse mortgage process in Canada.
The ILA lawyer will explain all of the loan documents and the disclosure documents with you before you sign anything.
The objective of the ILA session is to ensure you fully understand the reverse mortgage terms and conditions and feel confident in your decision to get a reverse mortgage without any external pressure.
Once the ILA lawyer feels comfortable that you are ready to sign the documents, they will complete an ILA certificate and forward that ILA certificate back to us, which we will send to the lender's lawyer.
Step 10: Closing
In the closing step, your real estate lawyer will register the new reverse mortgage on title, receive funds from the reverse mortgage lender, pay off any existing mortgages, and deposit the balance of funds into your bank account.
You will later receive a complete report from your real estate lawyer, showing you very clearly what was done, how much it cost and how the reverse mortgage funds were disbursed.
You will also receive copies of the title documents and other documents that you signed for you to keep for your records.
This final step marks the completion of the reverse mortgage application process, allowing you to enjoy financial freedom and peace of mind!
- The reverse mortgage process begins with a discovery telephone call and involves careful collection of information about your retirement needs and wants.
- Your dedicated reverse mortgage advisor will work to ensure the entire transaction happens seamlessly
- The appraisal determines the property value and is essential for calculating the final reverse mortgage loan amount.
- Independent legal advice is required for all reverse mortgage transactions in Canada to ensure a homeowner has a full understanding of the terms and conditions.
10 Reverse Mortgage Steps Summarized:
- Initial Discovery Call
- Complete Application & Credit Review
- Underwriting & Lender Submission
- Initial Quote Review
- Home Appraisal
- Document Collection
- Document Review & Approval
- Reverse Mortgage Finalized
- Independent Legal Advice
- Closing & Funds Advance
Q: How does RetireBetter determine which lender is best suited to my needs?
A: We consider various factors, including your financial situation, property value and location, your preferences and current promotions to match you with the lender offering the most beneficial terms and conditions.
As a reverse mortgage broker, our lender partnerships are not limited to HomeEquity Bank and Equitable Bank (offering the CHIP reverse mortgage and the Flex reverse mortgage, respectively). In fact, we have the most extensive reverse mortgage lender roster in Canada.
Q: Can I change my mind about receiving funds as installments after the process has started?
A: You can change your mind about how you want to receive the money from your reverse mortgage right up until a few days before closing.
After that time, you can still make changes but the change will delay the closing of the transaction.
Once you’ve closed the transaction, if you change your mind, contact us to discuss your options.
Q: Can I still get a reverse mortgage if my credit score is low?
A: A low credit score may affect eligibility for certain products offered by HomeEquity Bank and Equitable Bank but will not affect your ability to get most reverse mortgage products in Canada.
We hope this article has made you feel comfortable about the reverse mortgage process and working with RetireBetter.
By working with RetireBetter to get a reverse mortgage, we want you to know that the process will be filled with transparency, understanding, and personalized service.
If you’re contemplating a reverse mortgage, don’t hesitate to reach out to us and begin the conversation today!