There are many misconceptions surrounding reverse mortgages. There are only three reverse mortgage lenders in Canada along with an alternative lender option and all 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 the lenders will register a charge on the title of the property – you do not transfer home ownership to the lender.
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 and 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 the 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.
Please give me a call at 1-888-561-2679 or alternatively you can book a time on my calendar for a chat. www.calendly.com/april-dunn
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.