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Although reverse mortgages might seem controversial, they’re becoming more and more popular in Canada, providing older Canadians with greater financial security. They’re different than traditional mortgages in several ways, and as everything new and different, they arouse suspicion. Let’s take a closer look at them!
What is a reverse mortgage?
A reverse mortgage is a home loan that allows homeowners to convert part of the equity of their home into cash. When you take a traditional mortgage, you have to pay payments on a monthly basis that reduce your debt and build up equity. While traditional mortgages are usually used to buy or refinance your home, reverse mortgages help older people to remain in their homes. Through this mortgage, the homeowners obtain cash — the lender pays the consumer. It’s becoming a favourite choice of many seniors in Canada, the US, the UK, and India.
How it works
The eligibility criteria don’t include credit scores or income in the qualification process because almost all older Canadian homeowners have an amount of equity in their home. Homeowners aged 60 years and over can qualify for this mortgage. The loan amount depends upon the age of the youngest borrower, the appraised value of the home, the equity built up in the home, the chosen loan program, and the way in which you’d like to receive the loan funds. The lender can provide you a single payment or monthly payments. Another option is to apply for a line of credit that allows the homeowner to withdraw the required cash when needed. These different types can be combined as well.
Canada Reverse Mortgage is Canada’s number one choice for information and customer service. They provide free information, and their licensed mortgage brokers access dozens of mortgage lenders across Canada.
If you have debt or need money to fix up your home, for healthcare costs, for a vacation, or to help your children, reverse mortgages are worth considering. Here are the main advantages of taking a reverse mortgage:
- Homeowners don’t have to pay anything. They receive money.
- The borrower can use money for anything.
- Homeowners don’t have to to pay any tax on the revenue received on this mortgage.
- Seniors can’t lose their homes. They have a right to stay in their homes until they sell them or pass away.
- Reverse mortgages help homeowners to stay in their homes and pay off debts and all the bills that they can find difficult to cover.
Reverse mortgages are often called rising debt and falling equity loans. They reduce the borrower’s equity as they don’t require monthly payments. Taking this type of mortgage can decrease eligibility to receive Medicaid benefits and Supplemental Social Security income, but there is still Medicare and Social Security Income that the borrower can qualify for. The rates are adjustable, so they can increase your interest and, as a result, your debt.
If you’re planning to take this or any other type of mortgage, you should be careful and consult with a mortgage specialist for further information and advice.