equity for your home

Understanding Reverse Mortgages

What is a reverse mortgage?
Reverse mortgage basically is the exact opposite of the traditional type. It reverses the normal flow of home-equity mortgage payments. Instead of the homeowner making payments to the financial institution to settle the mortgage, the bank extends a loan to the homeowner in exchange for its eventual claim on the house. The bank will get its money plus interest back when the home is sold once the homeowner dies. With this type of mortgage, homeowners who otherwise have financial challenges can live in their own homes and still meet all of their financial obligations.


over 65 homeownersTo qualify for a reverse mortgage, you must:

  • Be at least 62 years old
  • Own a single-family home or any other approved property
  • Live in the house as your primary residence
  • Have repaid all or most of mortgage on the house

How It Works

The amount of money that can be borrowed depends on the age of the borrower, the value of the house and the interest rate. While borrowers with an existing mortgage on their home can still qualify for a reverse mortgage, the old mortgage would be paid off first before the homeowner can get anything.

Money from this mortgage can be disbursed in many different ways. Most homeowners take the payments as a repayment-free line of credit, which allows them take money from the approved loan amount anytime they need it. Funds may also be paid by a tenure method, which offers equal monthly payments provided the borrower continues to live in the house.

A reverse mortgage becomes due:

  • When the home is sold
  • When the borrower dies then the property has up to 12 months to pay off the loan
  • When the homeowner no longer lives in the house for over 1 year then he/she has up to 12 months to repay the loan by selling the house or refinancing

Reverse Mortgage Pros

  • senior with equityNo regular payments required
  • No income requirements
  • No minimum credit rating
  • No restrictions on the use of proceeds
  • Provides tax-free and guaranteed income
  • No personal guaranty requirement
  • Reverse mortgage has no effect on your credit score
  • You own the home at all times

Reverse Mortgage Cons

  • You have pay your property taxes and maintain the house
  • You must be 62 years of age or older to qualify for this mortgage

In conclusion, remember to weigh the pros and cons of reverse mortgage before signing for it. It can prove useful if you want to reduce the risks of outliving assets, repay your existing mortgage or even fund long-term care insurance.

For more information on reverse mortgages, you can call Seniors’ Lending Centre at 604.614.2382 or fax 604.463.7886. They are very helpful and will guide you through all of your mortgage needs.