While Tom has pointed out that reverse mortgages are controversial, they are becoming increasingly popular in Canada. It’s a plan that gives older Canadians greater financial security. A reverse mortgage is a type of home loan that allows homeowners to convert a part of the equity in their home into cash. Through this mortgage, the homeowners in Canada can obtain cash, without having to sell their home. However, one can qualify for this loan if they are at least 60 years old and owns their home or condo.
Benefits of taking a reverse mortgage in Canada
- No monthly payments: A reverse mortgage can provide a regular source of income to the seniors rich in home equity in Canada. Rather than consumer paying the lender, here the lender pays the consumers.
- It is easy to qualify: Almost all the senior homeowners in Canada have a considerable amount of equity in their home. Due to this reason, the eligibility criteria don’t include credit scores or income in the qualification process. Homeowners who are at least 60 years old can qualify for this mortgage.
- Tax-free income: The seniors are not required to pay any tax on the revenue received on this mortgage. It’s their home, their money, and they have already paid tax on it. Technically, this is not income at all – it is merely changing their non-cash equity into cash.
- One cannot be kicked out of his home: The homeowners cannot be evicted from their homes under the terms of a reverse equity mortgage. A homeowner has the legal right to stay in his home until he passes away or until he decides to sell his home and move out.
- One can use the money for anything: The money that the homeowners receive from this type of mortgage can be used for any purpose. This means that the homeowners can use this money for paying the maintenance and utility bills or going on a dream vacation.
- Allow you to remain in your home: It often happens that the homeowners find it difficult to pay their maintenance and utility bills in Canada. This kind of a mortgage lets them to convert the value of their home into cash – thereby allowing them to stay in their home.
The demand for reverse mortgage in Canada is increasing because of the above mentioned benefits. If you are planning to take this mortgage, then you can consult a mortgage specialist for further information and advice.
Bio: This guest post was written by Neil, who writes about mortgages at MortgageFit.com.
Related Posts:
If you’d like to write a guest post for Canadian Finance Blog, we’d be happy to see what you’ve got!
All of the points made above are valid, but I would caution that a reverse mortgage should be a absolute last resort with out selling the home. Interest rates are high compared to other lending products.
If one can qualify, a secured credit line can accomplish the same thing at a much lower rate of interest.
I would agree with Ryan’s point. This article was written by a person with a vested interest in selling mortgages. The reverse mortgage appears to be a great deal until the homeowner decides to sell and then finds that much of their equity has been eroded, often at higher rates than a secured line of credit might have charged. In several cases of which I am aware nearly the entire homeowners equity was eaten up by the interest on the reverse mortgage, leaving the senior with virtually nothing. Often reverse mortgage promoters use the selling point that the mortgage does not require any payments. In actuality the payments are merely deferred until the the property is sold, when the principal and interest come due. Beware a wolf in sheeps clothing.
[...] Financial Blog seems to be of two minds about reverse mortgages, where they have a post Six Benefits of a Reverse Mortgage but they also have said Avoid the Financial Trap of a Reverse Mortgage ? I think reverse mortgages [...]
[...] to pay off, I’m sure this article from Canadian Finance Blog will be a huge help — Benefits of Taking a Reverse Mortgage. 15. Everyone would not like to think of dying. Death is one thing that is not on our plans, [...]
doesn’t the bank end up owning the home though? i thought this was a trick and it made it easy for people who had no relatives but if you do then the bank gets the home and your loved ones get left in the dust…am i wrong?
[...] Canadian Finance Blog posts on the advantages of reverse mortgages as a follow-up to a previous post on the disadvantages. [...]
Reverse mortgages… equivalent to using your home as an ATM machine…
this is one of the reasons for housing meltdown in US. If it were to persist in Canada, then we are bound to experience a fatal housing (& financial) crash
I think all of the negative taboo surrounding this topic is outdated. There was a time when Canadians would be ashamed of having a mortgage when entering retirement, today, that’s a reality for a number of us. I don’t fully endorse the plans that are set up as actual reverse mortgages as much as I would simply buy into one of the Australian mortgages offered by two major institutions in Canada and use it simply as a HELOC. The fees and interest rates are more favourable than the CHIP deal and the balance can also be life insured. So for those who are having trouble making ends meet and unrealistically want to leave something behind for thier heirs?? They can insure the balance and leave the family homestead to the kids mortgage free. So you can indeed have your cake and live comfortably too.
Why live in poverty when you’re sleeping in a $300,000 asset?
Different strategies for different times.
Rick Mc