After working hard for decades, every senior wants to enjoy retirement without financial worries.  Sadly, many seniors are finding it harder to achieve the dream of a stress-free retirement. More Canadians than ever before are retiring with mortgages or little savings. If you are a homeowner in Canada over the age of 55 and are worried about your retirement, then you should learn about reverse mortgages.  

Discover why reverse mortgages are becoming popular with Canadians trying to enjoy their golden years with as much dignity, independence and financial freedom as possible.

Understanding Reverse Mortgages

A reverse mortgage is a loan designed to help seniors access home equity without selling their homes.  It is also designed for seniors because it does not require monthly payments for as long as the person lives in their home. The funds from this mortgage can be provided in a lump sum, as a line of credit or scheduled monthly payments (like a monthly pension). 

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How to Get a Reverse Mortgage

If you’re 55 or older, own your home, and have and have built up some equity, you could be eligible for this unique mortgage designed for older homeowners. The amount of money you can borrow will depend on the value of your home, the equity you’ve accrued, and your age

Benefits of Reverse Mortgages

Reverse mortgages offer many benefits for older homeowners. They allow a homeowner to tap into their equity without requiring monthly payments. Without the requirement to make monthly payments, a homeowner’s monthly cash flow improves significantly, and the savings can be spent on other important items, such as personal support care or medical needs. Homeowners can also use a reverse mortgage to help their family members and allow grandparents to create vacation memories with their loved ones.

Reverse mortgages also allow homeowners to avoid downsizing, and live independently in their own home.  By using the money from a reverse mortgage, homeowners can hire professionals to maintain their home, or pay for renovations that will allow the homeowners to stay in their homes rather than moving into a long term care facility. Some homeowners simply use a reverse mortgage to pay off their debts; others use it as a line of credit in case of unexpected expenses. 

Overall, with a no payment mortgage like a reverse mortgage, retired homeowners can just focus on other priorities. The key thing to remember is that you can use the money from a reverse mortgage any way you want.

Taxes and Government Benefits

If you use a reverse mortgage to access your home equity, you will not have to pay any income tax.  You will also not lose any government benefits since the money received from a reverse mortgage is a loan and will eventually need to be paid back. 

The Biggest Reverse Mortgage Myth

In Canada, you do not lose your home if you take a reverse mortgage.  The home and its real estate will stay in your name and is not transferred to the reverse mortgage lender.  As long as a homeowner meets their loan obligations, they will be able to live in their home for life without making any mortgage payments.

Reverse Mortgages and Interest Rates

Many people who are not familiar with reverse mortgages claim they charge very high interest rates and should be avoided at all costs. It’s true that reverse mortgage rates are slightly higher than traditional mortgages and home equity line of credit.  But reverse mortgages are cheaper than credit cards, personal loans and private home equity loans, making them a better option. 

Considering that reverse mortgages do not require any payments to be made for your entire life, and are regulated by the Canadian government (just like all mortgages), homeowners should not look at reverse mortgages as being too expensive to consider. 

Paying Off Your Existing Mortgage with a Reverse Mortgage

Retirees on a fixed income often struggle with their mortgage payments. Thankfully, reverse mortgages offer an intelligent solution without monthly payments, allowing homeowners to enjoy their golden years without the stress of regular mortgage payments. Additionally, a reverse mortgage can give homeowners peace of mind by providing them with a steady income stream in retirement. This means that retirees can enjoy a secure source of income without worrying about making regular repayments on their home loans.

Overall, by using the equity in your home, a reverse mortgage can pay off your existing mortgage and provide you with an additional monthly stream of income that is tax free and will not affect your other government benefits.

The Process of Obtaining a Reverse Mortgage

Are you considering applying for a reverse mortgage? If you’ve ever taken a traditional mortgage before, then you’re already familiar with the process: The first step is to fill out an application with our team at RetireBetter so we can fully understand your financial history, income sources, property, and mortgage balance. We’ve made this process very easy and can typically do it over the telephone with you. Once we understand your needs, we will provide you with recommendations about which lender is best for you.  While HomeEquity Bank and its popular “CHIP Reverse Mortgage” are most commonly known, we also work with other lenders that provide similar mortgages.  

We will explain all of the options to you and make sure all of your questions are answered.  We do not rush the process. We will make sure you are comfortable with the idea of getting a reverse mortgage and understand how a reverse mortgage works.  If you wish, we can even speak to your family members to answer any of their questions on your behalf.  Once you are comfortable, we will get an approval from your future mortgage lender. After obtaining approval, borrowers can move on to the final stage of closing the loan, where they will review and sign closing documents. To ensure you are being given all answers to your questions, you will be able to meet with a neutral lawyer who will give you independent legal advice.  The lender will provide you with documents to sign and will proceed to complete the loan transaction.  On closing, you will receive your mortgage funds immediately.  

We will be involved with you through the entire process, and ensure that you experience a smooth, stress-free and efficient closing process. From beginning to end, the entire process can be completed in less than a month. While securing a reverse mortgage may appear complex, working closely with experienced advisors at RetireBetter can simplify the process.

Tips for Managing Reverse Mortgage Risks

  1. Don’t borrow more than you actually need.
  2. Talk to your advisors at RetireBetter about your options to decide if a reverse mortgage is the best course of action for you or if other alternatives are available.
  3. If you have complex tax needs, speak with a tax professional to ensure you will not receive any unexpected surprises
  4. Involve your family members in the process to ensure they all understand the benefits of this product and aren’t thinking any of the myths of reverse mortgages are actually true.
  5. Make sure you have a will in place that states what is to happen to your home upon your death.
  6. Regularly review your annual mortgage statements so you are familiar with your loan balance.
  7. Make sure you understand your responsibilities under a reverse mortgage and follow your obligations to keep your mortgage in good standing.

Looking For a Way to Manage Your Finances and Achieve Financial Freedom? 

Consider a reverse mortgage. With no monthly payments, you can set your worries aside and use the loan funds however you wish.  Use this solution to improve your retirement lifestyle and live with the dignity and independence you always wanted. Consulting with an experienced reverse mortgage advisor like our staff at RetireBetter is vital if you’re seeking guidance on your options. Our professionals at RetireBetter can provide personalised advice tailored to your situation and do all the leg-work for you.  We complete more reverse mortgage transactions than any other advisor in the country—let us help you also!