Things to Know if Your Mortgage is Up for Renewal
As Canadians are living longer and healthier lives, many are looking to unlock the equity in their homes to help fund their retirement. One option to consider is a reverse mortgage, which allows you to access the value of your home without having to sell or move out.
Here are some important things to keep in mind if you are considering a reverse mortgage:
Here are some important things to know about reverse mortgages in Canada:
Eligibility: To be eligible for a reverse mortgage in Canada, you must be a homeowner aged 55 or older and own your home outright or have a small mortgage balance that can be paid off with the proceeds from the reverse mortgage.
Loan amount: The loan amount for a reverse mortgage in Canada is based on the value of the home, the age of the homeowner, and the location of the home. Typically, the older the homeowner and the more valuable the home, the higher the loan amount.
Interest rates and fees: Reverse mortgages in Canada typically have higher interest rates and fees than traditional mortgages. The interest rate on a reverse mortgage is typically higher than a regular mortgage because the loan is not being paid off over time, and the interest is compounding. The fees for a reverse mortgage may include appraisal fees, legal fees, and other closing costs.
Home equity: As you draw funds from your reverse mortgage, the equity in your home decreases. This means that if you sell your home or move out, there may be less equity available to you.
Repayment: The loan is only repaid when the homeowner sells the home, moves out permanently, or passes away. The loan must be repaid in full, including the principal and all interest and fees that have accrued over the life of the loan.
Risks: There are some risks associated with reverse mortgages in Canada. If the loan is not repaid in full, the lender may sell the home to recover the funds owed. If the housing market declines, there may not be enough equity in the home to cover the loan, leaving the homeowner with a debt they cannot pay.
Seek Advise from a Mortgage Broker: Before applying for a reverse mortgage in Canada, homeowners must receive advise from a Mortgage Broker. The broker will explain the terms and conditions of the reverse mortgage, as well as the risks and benefits, to help the homeowner make an informed decision.
A reverse mortgage can be a useful tool for Canadian homeowners who want to access the equity in their home without having to sell it or move out. However, it is important to carefully consider the terms and conditions of the loan and to fully understand the risks involved before applying.
