- Barbara Singh
Reverse Your Fortunes - Tap Into Your Equity
Growing older does have its advantages. Increased professional success, your financial path typically becomes clearer, wiser….and retirement. One obstacle that may have stood in your way may now be your greatest asset. Paying off your mortgage has become a financial reality. Years of hard work and disciplined financial planning have enabled you to chip away and eventually pay off your principal mortgage loan.
For those Ontarians who are 55 or older, financial needs can be varied and may include helping out adult children and grandchildren, long-shelved home renovations, the need for an additional source of income, or perhaps access to funds for travel and future retirement plans.
Ultimately, owning your property outright will give you the most financial flexibility. Mortgage and loan options are available to help older Ontarians reach some of their financial goals by tapping into arguably your biggest asset - your home.
Reverse Your Fortunes - Consider Ontario Reverse Mortgage
When considering tapping into existing equity, many older adults, 55 and older may believe that Home Equity Lines Of Credit (HELOCs) or a second mortgage is the only option. Although a line of credit using equity as collateral may end up being the preferred option, there is another mortgage option that is well worth looking into. Reverse Mortgages such as the Government offered Canadian Home Income Plan (CHIP) or the PATH Home Loan can be a great solution for those 55 and over.
A reverse mortgage is a home loan for homeowners who are 55+ years and there is no mortgage payment required. The loan itself is not required to be paid off until the end of the negotiated mortgage term or when your property is sold. Your home equity works for you by providing this equity mortgage, and you make no payments. The minimum loan amount must be $25,000. A reverse mortgage gives the homeowner access to equity built up in the property and can be distributed as either:
One lump sum payment
Set amounts on an agreed timetable
Monthly designated amounts.
If you meet the following criteria you are eligible for a reverse mortgage:
Age - you must be 55 or over - Both spouse must be at the minimum age of 55 years
Homeownership - You must own your own home
Home Value - The value of your home must be a minimum of $250,000
Title - All individuals on Title of the property must be on the Title on the reverse mortgage
Primary Residence - The property that is used as collateral on the loan must be the primary residence of the applicants. This means that the property must be lived in for a minimum of 6 months of the year.
When it comes to a reverse mortgage a borrower(s) is allowed to tap into equity built up in the property. Qualifying is very straightforward and by obtaining a reverse mortgage you can access up to 55% of the value of your home.
What is The Upside?
When assessing whether a reverse mortgage may suit your needs it is helpful to be aware of some of the advantages that reverse mortgage options may offer a homeowner:
Access considerable funds
You can stay in your own home
You choose how to spend the money that you receive
No need to access Registered Accounts
Pays off the existing mortgage balance, if there is one
You make no mortgage payments
So What About the Potential Downside?
Slightly higher Interest Rates
Early Repayment Charge
Equity has already been accessed by existing mortgage or a lien
Estate planning may be impacted
Lack of information or fear over potential repercussions may leave some senior homeowners hesitant to commit to a reverse mortgage. Let us address some of the commonly held views surrounding this form of mortgage:
Only for the poor - It is the opposite! Only those (55+ years old) that have their mortgage paid off (or small balance) and have considerable existing equity are eligible.
Very High-interest rates - Rate may be slightly higher but generally are quite comparable to a long-term amortized mortgage.
Bank will own my home - No. You continue to own your home. (Technically, if we look at it that way, even with a regular mortgage, until we finish paying off the mortgage completely, the bank always has “rights” on our property)
Cannot sell your home - Incorrect. You will still have the freedom to sell your house any time you want and pay off what is owed upon selling.
For any further questions about a reverse mortgage or any other type of mortgage products, please connect with me and I will be happy to discuss further.
Let the equity in your home reverse your fortunes