Are you a Canadian senior looking for a way to supplement your retirement income? Have you considered a reverse mortgage but are concerned with all of the horror stories you have heard?
At RetireBetter, we understand that retirement planning can be overwhelming, and that's why we're here to help. As a trusted and experienced reverse mortgage advisor, we can help you navigate the complex world of reverse mortgages and develop a customized plan that meets your unique needs and goals. One of the first questions we are often asked is, “Are reverse mortgages legitimate?” If you’re thinking the same question, you’re in good company. Before we dive in, let’s discuss the basics of a reverse mortgage.
What is a Reverse Mortgage?
A reverse mortgage is a type of loan that allows you to access the equity in your home without having to sell it. Unlike a traditional mortgage, reverse mortgage lenders do not require any payments to be made while you are alive and living in the home. Reverse mortgages have been offered in Canada for more than 25 years and the most popular reverse mortgage product is the CHIP Reverse Mortgage. The CHIP Reverse Mortgage is offered by HomEquity Bank and is available to homeowners aged 55 and older.
Reverse mortgages are becoming increasingly popular in Canada, with more and more seniors choosing this financial product to supplement their retirement income. Other homeowners are using reverse mortgages when they cannot get a suitable home equity line of credit, home equity loan or real estate secured loans. According to a report by the Canadian Association of Accredited Mortgage Professionals, the number of reverse mortgages in Canada increased by 22% in 2020, with the average loan amount being $190,000.
Safety and Legitimacy of Reverse Mortgages
Reverse mortgages are safe and legitimate financial products that are regulated by the federal government and also the provincial governments. In Canada, the Office of the Superintendent of Financial Institutions (OSFI) oversees the regulation of reverse mortgages. Similar to the Housing and Urban Development Department (HUD) in the United States, OFSI supervises ensures all lenders follow strict guidelines to ensure the safety and security of their clients.
One common concern that borrowers may have about reverse mortgages is the possibility of losing their home. However, with a reverse mortgage, you retain ownership of your home, and you can continue to live in it as long as you meet the terms of the loan. You are also responsible for maintaining your home and paying property taxes and insurance. Another concern that borrowers may have is the possibility of owing more than their home is worth. However, with a reverse mortgage, you can never owe more than the value of your home. If the value of your home decreases, the lender is responsible for the difference, not you.
It's also important to note that reverse mortgages are not a one-size-fits-all solution. At RetireBetter, we take the time to understand your unique needs and goals and develop a customized plan that meets those needs. We can help you determine if a reverse mortgage is the right choice for you and provide you with the information you need to make an informed decision.
In addition, we work with reputable lenders who are committed to providing safe and secure reverse mortgages to their clients. We only work with lenders who are approved by the federal government and who have a proven track record of providing excellent customer service.
Benefits of Reverse Mortgages
Reverse mortgages offer several benefits to Canadian seniors who are looking to supplement their retirement income. Here are some of the key benefits of a reverse mortgage:
Access to Home Equity:
A reverse mortgage allows you to access the equity in your home without having to sell it. This can be particularly beneficial if you need money for home improvement projects or repairs. For example, if you need a new roof or furnace, a reverse mortgage can provide you with the funds you need to make these necessary repairs.
According to a report by HomEquity Bank, the average amount of equity released through a reverse mortgage in Canada is $150,000.
No Monthly Payments:
With a reverse mortgage, you do not have to make monthly payments to the lender. This can be a great way to supplement your retirement income without having to worry about monthly payments.
According to a report by the Canadian Association of Accredited Mortgage Professionals, 93% of reverse mortgage borrowers in Canada are satisfied with their decision to take out a reverse mortgage.
Flexibility:
A reverse mortgage provides you with flexibility in how you receive your funds. You can receive the money in a lump sum, as a line of credit, or in monthly payments. In terms of interest rates, you can choose between fixed or variable rates. You can repay the loan at any time or keep it until you pass away or sell the home.
All of this flexibility means a reverse mortgage can be a great way to meet your unique financial needs and goals. For example, if you need money for a one-time expense, such as a medical bill, a lump sum payment may be the best option. If you need ongoing income, monthly payments may be the best option.
Tax-Free:
The money you receive from a reverse mortgage is tax-free, which means you can use it however you like without having to worry about paying taxes on it. This can be a great way to supplement your retirement income without having to worry about the tax implications.
Won’t Affect Government Benefits:
Since the money from a reverse mortgage is a loan and not income, it will not affect any government benefits you are receiving that are based on your income levels. In other words, you will not lose any government benefits if you get a reverse mortgage.
No Risk of Losing Your Home:
With a reverse mortgage, you keep ownership of your home, and you can continue to live in it as long as you meet the terms of the loan. You are only responsible for maintaining your home and paying property taxes and insurance.
According to a report by HomEquity Bank, 99% of reverse mortgage borrowers in Canada are able to stay in their homes for as long as they want.
Peace of Mind:
A reverse mortgage can provide you with peace of mind knowing that you have access to the equity in your home if you need it. This can be particularly beneficial if you are on a fixed income and need additional funds to cover unexpected expenses.
Financial security and independence are very important needs in retirement. According to a report by HomEquity Bank, 91% of reverse mortgage borrowers in Canada feel more financially secure after taking out a reverse mortgage.
Eligibility Requirements
To be eligible for a reverse mortgage in Canada, you must meet the following requirements:
Minimum Age:
You must be at least 55 years old to qualify for a reverse mortgage. You cannot be too old to receive a reverse mortgage.
Homeownership:
You must own your home and it must be your primary residence. You cannot get a reverse mortgage on vacation homes or investment properties.
Property Value:
The leading lenders require you to have a property worth at least $250,000 and will not provide a reverse mortgage loan for less than $100,000. The smaller lenders can be more flexible with these amounts.
Property Type:
The property must be a single-family home, a semi-detached home, a townhouse, or a condominium. You cannot get a reverse mortgage on mobile homes or homes you are renting.
At RetireBetter, we can help you determine if you meet the eligibility requirements for a reverse mortgage and provide you with the information you need to make an informed decision.
How to Apply for a Reverse Mortgage
Your traditional bank does not offer reverse mortgages! To apply for a reverse mortgage, you will need to work with a lender who offers this type of financial product. At RetireBetter, we work with prominent lenders such as HomEquity Bank and Equitable Bank to provide our clients with safe and secure reverse mortgages.
The application process for a reverse mortgage typically involves the following steps:
Initial Consultation:
You will meet with a reverse mortgage advisor to discuss your financial situation and determine if a reverse mortgage is the right choice for you.
Application:
If you decide to move forward with a reverse mortgage, you will need to complete an application and provide some basic documentation such as proof of income and property ownership.
Appraisal:
The lender will conduct an appraisal of your home to determine its value. In some cases, an electronic valuation of the property can be completed and an appraisal is avoided.
Approval:
If you meet the eligibility requirements and your home is appraised at a sufficient value, the lender will approve your reverse mortgage.
Independent Legal Advice:
You will be required to meet with a lawyer before signing any loan documents. This is to make sure you understand all of the terms of the reverse mortgage.
Funding:
The final step of the process is the funding of your reverse mortgage. A lawyer will pay off any existing mortgages and register the reverse mortgage on your home’s title. You will then receive your loan funds in the form of a lump sum, line of credit, or monthly payments.
At RetireBetter, we can guide you through the entire application process and ensure that you have all of your questions answered at every step. We’ve completed more reverse mortgage transactions in Canada since 2017 than anyone else—we know how to make the experience a smooth one for you.
Conclusion
In conclusion, a reverse mortgage can be a safe and legitimate way for Canadian seniors to access the equity in their homes and supplement their retirement income. With no monthly payments, tax-free funds, and the flexibility to receive your funds in a way that meets your unique needs, a reverse mortgage can provide you with the financial security and peace of mind you need in retirement.
It's important to note that not all reverse mortgages are created equal. At RetireBetter, we work with reputable lenders who are committed to providing safe and secure reverse mortgages to their clients. We only work with lenders who are approved by the federal government and who have a proven track record of providing excellent customer service.
We also understand that a reverse mortgage is not the right choice for everyone. That's why we take the time to understand your unique needs and goals and develop a customized plan that meets those needs. We can help you determine if a reverse mortgage is the right choice for you and provide you with the information you need to make an informed decision. Contact RetireBetter today to learn more about how we can help you access your home equity safely and legitimately with a reverse mortgage.
