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Mortgage-Matters

Reverse mortgage safeguards

There are many misconceptions surrounding reverse mortgages. There are only two reverse mortgage lenders in Canada and both of them have safeguards in place to ensure that the equity in your property is kept safe and secure.

Here are the four most common misconceptions about reverse mortgages in Canada. Let’s bust those myths.

  1. You will always retain title and ownership of your home. Just like a regular mortgage, your home is used to secure the loan – and either of the banks will register a charge on the title of the property – you do not transfer home ownership to the bank.
  2. Lending amounts are conservative. The reverse mortgage lenders will only lend up to 55% of the value of the home, while factoring in the homeowner's age, property type and property location. The older the client, the higher the loan amount they can qualify for. This is done so that the reverse mortgage never exceeds the value of the home.
  3. Homes typically appreciate in value. The total value of your home is likely to appreciate over time, especially if it is located in a major city. Meanwhile, only the interest on the borrowed amount accrues. Based on that differential, even a modest home appreciation allows for equity preservation. This is why over 99% of homeowners have money left over when their loan is repaid. 
  4. No negative equity guarantee means loan can never be more than the sale price of the home. Many people think that if their home equity depreciates at the time of sale, they/their heirs will end up owing more than the house is worth. However, one of the lenders guarantees that if the home depreciates in value and the mortgage amount due is more than the gross proceeds from the sale of the property, the lender covers the difference between the sale price and the loan amount (as long as the property taxes and mortgage obligations are met and it does exclude administrative fees and the interest accumulated after the due date).

As your mortgage broker, along with the lenders, I am focused on preserving your equity. That's why the lenders have built these safeguards into the reverse mortgage products to ensure that you will not be at risk of losing your home when accessing your home equity. 

Please contact me to find out more about how a reverse mortgage is actually a great way to improve cash flow, while allowing you to stay in your home. Together we will compare the products of both reverse mortgage lenders and also review other possible mortgage options for you to accomplish your goals. We will help to find you the right solution while making the process as stress free as possible.



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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



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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