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Mortgage-Matters

Reverse mortgage FAQs

Reverse mortgages are quite often misunderstood and there are always lots of questions.
Here are some of the most frequently asked questions with the answers.

How does a reverse mortgage work?

A reverse mortgage is secured by the equity in your home. Unlike a traditional mortgage in which you make regular payments, no monthly payments are required.

The big advantage with a reverse mortgage is you do not have to make any regular mortgage payments for as long as you or your spouse lives in your home.

Who is it for?

A reverse mortgage is designed exclusively for homeowners age 55 and older. This age qualification applies to both you and your spouse.

How much can I get and how is it calculated?

You can receive up to 55% of the value of your home. The specific amount is based on your age and that of your spouse, the location and type of home you have, and your home’s current appraised value.

You can contact me and I can quickly give you an estimate of how much you may be approved for.

How do I receive the money?

You can choose how you want to receive the money. A reverse mortgage gives you the option of receiving all the money you’re eligible for in one lump sum advance, or you can take some now and more later, or you can receive planned advances over a set period of time.

Will the homeowner owe more than the house is worth?

The homeowner keeps all the equity remaining in the home. In my many years of experience, more than 99% of homeowners have money left over when their mortgage is repaid.

The equity remaining depends on the amount borrowed, the value of the home, and the amount of time that’s passed since the reverse mortgage was taken out.

Will the bank own the home?

No. The homeowner retains title and maintains ownership of the home.

It’s required for the homeowner to live in the home, pay taxes on time, have property insurance, and maintain the property in good condition.

What if the homeowner has an existing mortgage?

Many of our clients use a reverse mortgage to pay off their existing mortgage and debts.

Should reverse mortgages only be considered as a last resort?

No. Many financial professionals recommend a reverse mortgage to supplement monthly income instead of selling and downsizing, or taking out a conventional mortgage or a line of credit.

What fees are associated with a reverse mortgage?

There are one-time fees to arrange a reverse mortgage such as an appraisal fee, fee for independent legal advice as well as a fee for administration, title insurance, and registration.

With the exception of the appraisal fee, these fees are paid for with the funding dollars.

What if the homeowner can’t afford payments?

There are no monthly payments required as long as the homeowner is living in the home.

If you are interested in more information about a R reverse mortgage we have a new website resource at reversemortgage-experts.ca where you can request

The Complete Reverse Mortgage Guide or please give me a call if you have any questions at 1-888-561-2679.





Buying a vacation home

Are you dreaming of a summer cottage on the water for weekend getaways?

According to a recent Re/Max market survey, retirees and baby boomers are driving vacation property purchases, but here in B.C., professional couples and families are also buying vacation homes.

Many are accessing equity in their primary residences to make these purchases but there is also a great insured mortgage program available to make your dream of owning a vacation property a reality with a little as a 5 per cent down payment required.

Here are the types of properties that can be covered under this program.

Type A Properties:

  • Must be owner-occupied or occupied by an immediate family member
  • Located in good marketable areas with evidence of re-sale demand.
  • The property value must be less than $1 million
  • The maximum mortgage amount allowed is $600,000 for most of Canada
  • Maximum of one unit
  • For properties valued up to $500,000 a minimum down payment of 5 per cent is required.
  • For properties valued over $500,000 and less than $1 million – 5% down payment is required up to $500,000, with an additional 10% down payment on the portion of the home value above $500,000

As a side note, this program can also have other uses. Perhaps you are considering a place for your children to live while they attend university, a condo in the city to avoid the hectic commute or to help buy a home for your elderly parents who are on a fixed income.

This is possible as long as the family members are living there on a rent-free basis.

Up to 95% financing is available for owner occupied properties all across Canada. (A quick note here: These programs are not available to purchase investment properties, time-shares or similar properties that offer rental pools for the owners.)

Type B Properties:

The same details are required for these properties as above except for the following:

  • The property does not need to be winterized
  • Seasonal access is permitted (IE: road not plowed during the winter)
  • A minimum of a 10% down payment is required for these types of properties.
  • Properties located on an island must have year-round bridge or ferry access.
  • The maximum mortgage amount is $350,000.

Investment properties or rental pool or timeshare properties are not eligible for this low down payment program.

There are many financing options available through a wide range of lenders.

The requirements for mortgages on secondary and vacation home properties can vary greatly from lender to lender so you will want to make yourself aware of all of the choices available in the mortgage marketplace.

You’ll want the best possible financing options for your new real estate investment. 

Instead of waiting many years to save enough to purchase a vacation home, you may be able to access the equity in your principal residence to finance the purchase.

This involves a cash-out refinance of your property and there again are many options available.

Other down payment options may include a second mortgage on your current property, personal savings or gifted funds (Type B property purchases do not allow for gifted down payments.) 

With our current interest rates very low, now might be the time to get serious about your dream to own a vacation property.

If you would like to explore your options so you can enjoy a new vacation home this summer please give me a call to discuss.



Is your mortgage portable?

Are you thinking about moving up or perhaps downsizing?

If so, there are several things that you should consider regarding your financing for planning the move.

You may believe that your mortgage is portable (you can take it with you) should you decide to move to a new property but did you know that both you and the new property must requalify for the mortgage.

You should speak to your mortgage broker to find out if you ‘qualify’ to port your mortgage before you start shopping for a new property or list your current property.

Definition of porting

  • This option allows you to transfer the interest rate and all the existing terms and conditions of your current mortgage over to your new property. The advantage of porting your mortgage is that you automatically avoid any prepayment fees for breaking your existing mortgage.

But not all mortgages are portable and every lender has different policies regarding the porting of their mortgages.

As an example, most variable rate mortgages and home equity lines of credit are not portable, which means you may not be able to take your current great rate with you to a new property and will be required to qualify for new mortgage financing.

If you stay with your current lender they may waive penalties.

Here are a few other points that you should consider to prevent any surprises.

Mortgage penalties

  • Most mortgages are portable but some lenders may not be willing to approve the moving of your current mortgage to a new property. You may have to seek new mortgage financing with another lender as your current lender may have issues with the property – self-managed strata properties, former grow-ops, age restricted properties, etc. Or you may no longer qualify for financing with this lender due to all of the changes to mortgage qualifications in recent months or changes in your own circumstances.
  • There can be a limited window of time for you to complete the porting of your mortgage. Some lenders only allow 15 days to complete while others will go up to 120 days. It’s important to know this information in advance as you plan your move.
  • If the sale of your current home completes before the purchase of your new home, a lender is going to collect any penalties that are owing and will not reimburse you until the purchase of your new home is complete. This needs to be included in your financial budget for the purchase of your new home.
  • Many lenders will not allow you to port and increase your mortgage so you may be actually looking at today’s rates on a new mortgage financing rather than porting the rate on your current mortgage.
  • If you currently have your mortgage with a credit union and you move out of their trade area or out of province, you most likely cannot take your current mortgage with you to a new property.
  • Whether you are moving up or moving down, with a little bit of planning and budgeting all can go smoothly. You may not be planning for a move when you initially secure your mortgage but a little planning for the future may save you thousands of dollars should you want or need to make a move to a new property.

Every lender has different policies regarding the porting of their mortgages and it’s important to secure your mortgage with a lender that not only has great rates but also the most flexible terms and conditions.

Your first call should be a chat with your mortgage broker to ensure you qualify for your financing before listing your current home and then you can move forward with confidence to your new home.



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Self-employed, owe taxes?

When you are self-employed and don’t have tax deductions coming off your paycheques and haven’t made other provisions to cover your tax debt at the end of the year, you could have a problem.

Tax debt is serious and should be dealt with immediately.

The Canada Revenue Agency has far reaching powers when you owe money to them. They will find a way to collect.

They charge penalties and interest on your overdue taxes.

They can withhold payment of your Child Tax Credit and GST rebate.

They can take money from your bank account or garnishee your wages.

If you own real estate, the CRA can register a lien against your property if what you owe to them has been outstanding for an extended period of time.

This is done to guarantee that you pay your outstanding debt. When a lien is registered against your property, it can prohibit you from refinancing or selling it until the outstanding debt is paid in full.

An important issue to consider is that if you are self-employed and your income tax is not current, you will not be able to secure mortgage financing to purchase a home, buy a vacation property, transfer your mortgage or access equity in your property.

Even our alternative and private lenders will not advance a mortgage unless any CRA tax arrears are paid in full.

Canadian banks and credit unions will not provide an unsecured loan for the payment of income tax debt and they generally cannot refinance an existing mortgage to cover the debt either. 

The CRA will generally not accept any arrangement other than a full payment and this is due and payable at the time of your assessment or reassessment. They cannot set a precedent that would allow them to accept less from everyone else.

They have one of the highest rates of collection activity in Canada as our taxes fund public goods and services. So what do you do if you can’t pay them in full?

Contact them immediately. You may be able to negotiate a payment schedule if you can’t pay the full amount but they generally will not let it be outstanding for over a few months. Know that they will continue to charge the interest and penalties on the past due amount.

This is important to note: Filing for bankruptcy, or filing a consumer proposal, does not discharge a lien against your property.

If you go bankrupt on your CRA debt, the lien remains and – even worse – accrues interest over time. Even after your discharge from bankruptcy, the lien remains in force, until you eventually sell your home.

If you are a homeowner, having an experienced mortgage broker working for you can save you both time and money when seeking a solution to your CRA problem.

If you simply can’t pay the full amount of your back taxes, consider refinancing your mortgage and using the equity in your home, a consolidation loan is possible which can include tax arrears and other debts.

Mortgage brokers have access to lenders that will allow a refinance of your existing mortgage or second mortgage options to pay off outstanding CRA debt.

If you are a homeowner and are having issues paying off what is owed to the CRA this year, please give me a call to discuss at 1-888-561-2679 or email [email protected]



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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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