Using a reverse mortgage, a homeowner borrows money based on the amount of equity they currently have and pays that amount back once the home is eventually sold. It\u2019s called a \u201creverse\u201d mortgage because it eats into your equity rather than increasing it.<\/p>\n\n\n\n
When an older or retired homeowner needs of cash, options can be somewhat limited, especially if they aren\u2019t interested in selling their home or they rely on their other investments for long-term income. Pulling out equity through a refinance may not be feasible if a person\u2019s retirement income can\u2019t support a new round of mortgage payments.<\/p>\n\n\n\n
In these cases, a reverse mortgage can provide the necessary cash while allowing the homeowner to retain possession of an appreciating piece of real estate<\/a>.<\/p>\n\n\n \n\t\t\t\t\t\tCompare Canada\u2019s top mortgage lenders and brokers side-by-side and find out the best mortgage rates that will meet your need\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t Canada\u2019s two main providers of reverse mortgages are HomeEquity Bank, which began offering reverse mortgages in 1986, and Equitable Bank<\/a>, which was founded in 1970. While both are Schedule 1 banks, neither have physical branches you can visit. <\/p>\n\n\n\n HomeEquity Bank\u2019s reverse mortgage products are available from the company directly and through all of Canada\u2019s major banks, as well as some credit unions, mortgage brokers and financial planners. Equitable Bank\u2019s reverse mortgage products are available through independent mortgage brokers<\/a> who provide reverse mortgage services.<\/p>\n\n\n\n HomeEquity Bank offers reverse mortgages in all Canadian provinces but not any of the three territories. Equitable Bank only lends on homes located in certain areas of British Columbia, Alberta, Ontario and Quebec.<\/p>\n\n\n\n As with typical mortgages, reverse mortgages come in different types. When considering a reverse mortgage product, you\u2019ll have to choose between an open or closed mortgage agreement and decide whether whether you\u2019d prefer a variable or fixed mortgage rate.<\/p>\n\n\n\n Reverse mortgage types also differ in how they allow you to receive your money. Some products let you access your entire mortgage amount upfront; others combine an initial lump-sum payment with smaller withdrawals that can either be scheduled or made at your discretion.<\/p>\n\n\n\n The CHIP Reverse Mortgage<\/a> is Canada\u2019s oldest and most widely-used reverse mortgage. It was HomeEquity Bank\u2019s first reverse mortgage product, known in its early days as the Canadian Home Income Plan. It was rebranded as the CHIP Reverse Mortgage in 2014 and is now one of several different reverse mortgage options available from the company.<\/p>\n\n\n\n Reverse mortgages are generally pretty simple. But it\u2019s important to understand their eligibility requirements, interest rates and how the money is both doled out and paid back.<\/p>\n\n\n\n Even though reverse mortgage products have their own unique guidelines, the eligibility requirements tend to be fairly common. To be eligible, you must:<\/p>\n\n\n\n Getting a reverse mortgage generally begins by completing an estimate on a lender\u2019s website. Doing so will give you a general idea of how much you\u2019ll be able to borrow. <\/p>\n\n\n\n When evaluating your application and determining the maximum amount to lend you,, a lender will look less closely at your credit score and focus more on:<\/p>\n\n\n\n During the application process, you must include all individuals listed on the title. Lenders may also ask you to get legal advice regarding a reverse mortgage. Proof of having received this advice may be required.<\/p>\n\n\n\n One of the primary drawbacks of reverse mortgages is that they charge relatively high interest rates that will be in effect for as long as a loan is active. Because reverse mortgages don\u2019t have a typical amortization schedule<\/a>, interest can accrue indefinitely and eat up more of your home equity.<\/p>\n\n\n\n Both companies also charge fees. Equitable Bank\u2019s set-up fee is $995, and that\u2019s in addition to any legal or home appraisal charges you may incur during the application process. HomeEquity Bank\u2019s closing and administrative costs are advertised as $1,795 for its CHIP products, but may differ based on your circumstances.<\/p>\n\n\n\n Both lenders also charge their clients for paying off their reverse mortgages early:<\/p>\n\n\n\n If you get approved for a reverse mortgage, you\u2019ll have access to as much as 55% of the value of your home equity. You can choose to receive your money in two ways: either as a single lump-sum or as a combination of an initial advance and smaller payments spread out over time. Deciding which method is best for you depends on your financial needs. <\/p>\n\n\n\n If you need to pay for a major expense like a home renovation or family vacation, or want to consolidate debt<\/a>, it probably makes sense to opt for the initial advance and then schedule smaller, recurring payments over the next several years. <\/p>\n\n\n\n Receiving the entire loan at once can be risky, especially if you qualify for the maximum amount. Spending your reverse mortgage funds faster than anticipated can leave you in a desperate position if there are no other options available for freeing up cash. <\/p>\n\n\n\n One of the most attractive aspects of a reverse mortgage is the repayment flexibility. You aren\u2019t required to make any scheduled principal or interest payments. In fact, you shouldn\u2019t have to make any payments at all until you sell or move out of your home, or the last borrower dies and their estate sells the home.<\/p>\n\n\n\n Just remember that interest will accrue the entire time you have an unpaid balance on your reverse mortgage. Making regular payments, even if they\u2019re small, can help keep your interest costs in check. <\/p>\n\n\n\n You may be required to pay your loan back in full if your lender considers you to be in default. With reverse mortgages, default can refer to multiple scenarios, including:<\/p>\n\n\n\n Both Equitable Bank and HomeEquity Bank have \u201cno negative equity\u201d policies stating that borrowers will never owe more than their homes are worth, so long as they adhere to their mortgage contracts. In HomeEquity Bank\u2019s case, they offer to pay the difference if your home depreciates to the point where it\u2019s worth less than your reverse mortgage balance.<\/p>\n\n\n\n With Canada\u2019s housing market as competitive as it is, it\u2019s unlikely that your home would lose significant, long-term value. But if it does, neither you nor your descendants will be indebted to your reverse mortgage lender after you sell your home.<\/p>\n\n\n\n At first glance, refinancing a reverse mortgage might not make a lot of sense. If you don\u2019t have to make monthly payments anyway, why would you go through the hassle of refinancing?<\/p>\n\n\n\n But if your home has appreciated significantly and you\u2019re in need of more cash, your lender may allow you to refinance and set new mortgage terms. <\/p>\n\n\n\n Refinancing a reverse mortgage can be risky. You\u2019ll be older when you refinance, and age is a factor in determining how much equity you\u2019re allowed to take out. If you break a reverse mortgage contract in order to refinance, you\u2019ll likely be hit with prepayment penalties<\/a>. <\/p>\n\n\n\n A reverse mortgage can be a life-changing decision \u2014 for better or for worse. If your cash flow<\/a> has dried up and you have no other way to cover the cost of either major, one-time expenses or minor, daily expenses, a reverse mortgage is an effective way to fill those gaps, possibly for years.<\/p>\n\n\n\n But sacrificing home equity today means it won\u2019t be there in the future. Let\u2019s say you eventually have to sell your home to pay for residency in an assisted living facility. Paying back a reverse mortgage could knock a massive hole in the proceeds, and leave you with limited options when trying to secure long-term care. <\/p>\n\n\n\n Most scenarios won\u2019t be that dramatic, but those are the kinds of risks associated with reverse mortgages. Once that equity\u2019s gone, it\u2019s gone for good. <\/p>\n\n\n\nBest Mortgage Rates in Canada<\/h5>\n\t\t\t\t\t\t\t\t\t
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\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\nWho offers reverse mortgages in Canada?<\/h2>\n\n\n\n
Types of reverse mortgages<\/h3>\n\n\n\n
What is the CHIP Reverse Mortgage?<\/h3>\n\n\n\n
How does a reverse mortgage work in Canada?<\/h2>\n\n\n\n
Reverse mortgage eligibility<\/h3>\n\n\n\n
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Applying for a reverse mortgage<\/h3>\n\n\n\n
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Reverse mortgage interest rates and fees in Canada<\/h3>\n\n\n\n
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How do you receive your reverse mortgage funds?<\/h3>\n\n\n\n
Paying back a reverse mortgage<\/h3>\n\n\n\n
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Can you owe more than your home is worth?<\/h3>\n\n\n\n
Can you refinance a reverse mortgage?<\/h3>\n\n\n\n
Is a reverse mortgage a good idea?<\/h2>\n\n\n\n