The Future of the Reverse Mortgage
In the last couple of months, we have heard more and more about Reverse Mortgages. This post will help you have a better understanding of this product.
First, who can get a reverse mortgage?
This kind of loan is available for homeowners that are 55 or older.
What is a reverse mortgage?
A reverse mortgage allows you to get up to 55% of your home equity (home equity = value of your home – unpaid balance) meaning that the amount of cash you receive uses the actual equity as a collateral. However, you will have to fully pay any outstanding loans secured by your home when you use this product. As you aren’t making monthly payments, the interest on your reverse mortgage accumulates over the years and the equity you hold in your home will decrease. Reverse mortgages are subject to higher interest rates than most other types of mortgages. And the balance of your loan cannot exceed the fair market value of your home, so you cannot owe more than the fair market value.
This type of mortgage helps you borrow a tax-free lump sum, or a loan to set up planned advances that provides you a regular income, or a mix between these two, without losing the ownership of your home (meaning that you still have to pay for property taxes, insurance and other regular maintenance fees). Beyond that, even if your equity decreases as your reverse mortgage increases, keep in mind that real estate values can increase as well. And, even if you owe more than the fair value of your home, you will never pay more than the fair market value of your home at the date of sale.
There are, of course, plenty of other aspects to discuss with your CENTUM mortgage professional. Do not hesitate to call one of our brokers as we are always looking for your best interest®.
Posted by CENTUM Canada
on October 8, 2015