If you own your own home and are about to retire, you may not have to move or downsize. Reverse mortgages in B.C. make it possible to remain in your current home, by paying off your existing mortgage, and releasing equity that it holds.
This may sound too good to be true, but it’s not. The Canadian Home Income Plan (CHIP) by HomeEquity Bank is a national program that allows Canadian seniors 55 and older to borrow up to 55% of their home’s value, without losing the title to it. Reverse mortgages have been in existence in Canada since 1986, so they are not new, either.
To find out how you can take advantage of this type of loan, it’s best to first speak with a qualified mortgage broker in B.C. After reviewing your finances, they can let you know if this program is the right fit for you. Or, they can advise you on other programs and scenarios that may offer you more value.
Contact us today, and we’ll walk you through the process!
Below, we’ll answer some FAQs on reverse mortgages in B.C.
How can I qualify for a reverse mortgage in B.C.?
Reverse mortgages are only available to Canadian homeowners that are 55 and older. Anyone listed on the home’s title, including a spouse, children, or otherwise, must meet this age threshold in order to qualify. They must also be regularly living in the home at least 6 months of the year.Read more
The rest of the reverse mortgage application will depend on:
- The appraised value of the home
- The location of the home
- The type of home being borrowed against
- The condition of the home
- Your current, outstanding debt
- Your age
It’s always best to speak with a mortgage broker when seeking this type of loan. They are trained to prepare a proper application for you. They can also advise you on steps to strengthen your application for a reverse mortgage in B.C.
Contact us today – we’re ready to help!
What are the interest rates and fees on a reverse mortgage?
A reverse mortgage is a special way of accessing cash to fund a retirement lifestyle. It can take the place of downsizing in order to reduce living costs. That said, its interest rates can be a little higher than traditional mortgages or loans. But its conditions can be better for retirement, than say, an equity take-out (ETO), which requires you to make regular mortgage payments.Read more
The fees to obtain a reverse mortgage, if you qualify, will include:
- Appraisal fees
- Lawyer fees to obtain independent, legal advice (this may be required for the loan application)
- Administration, title insurance and registration fees (i.e. set up fees).
There may also be prepayment penalty fees, if you choose to repay your loan early.
What are the advantages of a reverse mortgage compared to other old-age housing loans?
The main upside of a reverse mortgage is that it allows you to stay in your current home, pretty much until you and your spouse pass away (or move into long-term care). This is, of course, dependent on how much of the loan you spend while you’re alive, and your other sources of financing.Read more
However, since you will remain the title-owner of the home, you can sell at any time, in order to repay the loan (and its prepayment penalty), if you need to.
On another positive note, if you do stay in your home, the loan you take out from a reverse mortgage will be tax-free, with no requirement to make monthly repayments.
This loan will also not affect Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) payments from the Government of Canada.
As you can see, this is a loan that is suitable for those with long-term financial stability and responsibility.
The other options for old-age housing loans include:
Click on an item below to expand its details
Obtaining a Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (HELOC) is moreso suited to short-term repayment plans. They are dependent on factors like interest rates, property values and your own income. They usually require scheduled, monthly repayment plans.
Reverse mortgages, on the other hand, are long-term loans. There is no rush to repay them, as long as all title holders live in the home it is borrowed against. It is not based on interest rates, property values or income.
Obtaining a personal loan
A personal loan can be risky, if the collateral is in the home. In other words, if you don’t pay back the loan per the lender’s terms, they can put a lien on your house, essentially taking it away from you. Or, other consequences may ensue.
A reverse mortgage does not require you to pay anything back until you pass away or move.
Downsizing by selling and moving into a smaller home
The final way to access cash in your home’s equity is by selling it. This would involve downsizing by buying a smaller-sized home, to obtain a less-costly mortgage. Or, you could sell your home and move into a rental, co-op, care home or otherwise, if you feel those are secure, long-term options for you.
With a reverse mortgage, you don’t have to move. You can use the equity in your home to pay off your current mortgage and lines of credit. This would essentially leave you mortgage-free.
You would then have the financial freedom to live off the equity you’ve built in your home, and your other sources of income (such as investments and government support payments).
You should obtain professional advice before committing to any of the above financial options.
What restrictions or rules come with reverse mortgages?
As far as your living situation, the main restrictions of a reverse mortgage are:
- You must continue living in your current home. You can not rent it out and move somewhere else, for instance.
- You must keep the home in good shape, so as not to decrease its market value.
- You must continue to pay taxes and home insurance on time.
- You must pay off your existing mortgage or secured loans to obtain the reverse mortgage. But you can use money from the reverse mortgage to do so.
There can be other details and rules to follow in your reverse mortgage contract, which a mortgage broker can go over with you.
After you pass away or move, the rules of a reverse mortgage can depend on a few factors. However, generally they are:
- You must pay a prepayment penalty if you sell your home to repay the loan before you pass away.
- You must repay the loan within a year of moving into an assisted living facility.
- Your estate must repay the loan within 180 days of your passing.
If your spouse is on the title of the home, and outlives you, they will be able to remain in the home under the same conditions as above. They will not be forced to move or sell the property before they pass away.
Just remember that your home equity will be tied to the interest you accumulate on your loan. It will all need to be repaid, eventually. That said, almost all borrowers of a CHIP reverse mortgage have leftover equity in their home by the time they pay back their loan.
What can I use reverse mortgage money for?
There are no restrictions to how you can spend your reverse mortgage loan (except illegal activity, of course).
You can use the money to travel, relieve debt, renovate, hand out early inheritances, pay for healthcare, buy another property or simply use it to pay for the cost of living over time.
How quickly can I obtain the cash in my home’s equity with a reverse mortgage?
A reverse mortgage can be paid out in one lump sum, or it can be paid out in smaller portions over time. This can depend on the options that you receive upon approval for the loan. A mortgage broker can help you answer this question more accurately for your case.
Apply for a B.C. reverse mortgage to fund the retirement lifestyle you’ve dreamed of!
A reverse mortgage can be a great option to secure long-term financial stability in your older years. This type of mortgage loan can release the burden of family support, or simply help you preserve your investments for longer. Best of all, they allow you to keep living in the home you’ve built many memories in.
To find out if you qualify for a B.C. reverse mortgage, we encourage you to speak with one of our mortgage brokers. We’ll take a closer look at your situation, and recommend a path that works for you.