Of Prime Interest: Reverse mortgage gains popularity with retirees
Over the past decade, reverse mortgage loans have greatly increased in popularity.
But just what is a reverse mortgage?
Basically, a reverse mortgage is precisely what the name states—it’s the opposite of a regular mortgage.
Rather than taking a loan out to buy your home, you take out a loan against the equity value of the home you already own.
Homeowners can obtain this loan in several ways, either has one lump sum, split into equal sums disbursed monthly, received on an occasional basis as a credit line or a combination of all these methods.
As with any type of loan, borrowers will be required to pay interest on any amount they receive. These loans can have fixed or adjustable interest rates.
With people living longer, after retirement a longer life means you need more money to live on.
A reverse mortgage loan can be the answer to increasing available funds over the long haul.
While there is no income verification, credit rating or medical checks required to approve for a reverse mortgage, there are other requirements associated with these loans.
The eligibility criteria are related to your current age (and your spouse’s age if you are not single), whether you own your own home, and the mortgage amount sill outstanding.
As well, you must be eligible for a reverse home mortgage in Canada, you must be at least 60 years old. Any spouse (including common law) must be at least 60 as well.
You must also own a home in Canada. You can’t obtain a reverse mortgage on a home that you don’t own, nor can you take out a reverse mortgage on a home that you own outside of Canada.
You must also have equity in your home in order to be eligible for a reverse mortgage. Your current mortgage, including any other loans secured against your home must not exceed 40 per cent of your home’s current value. In other words, you must have at least 60 per cent of your home paid off.
Once you have qualified for a reverse mortgage, you must promise to keep your home in good condition and not do anything that would reduce its market value.
You must also stay up to date with property taxes and insurance on the property.