Questions about reverse mortgages are coming up a lot these days—especially among Canadians close to retirement who are looking to make the most of their home’s equity. With so much talk (and confusion) surrounding how reverse mortgages work, it’s no surprise that the same questions keep popping up. To help bring some clarity, here’s a breakdown of the top 20 questions people ask me before deciding if this financial tool fits into their retirement plan..
1. What is a Reverse Mortgage and Who Can Get One in Canada?
A reverse mortgage lets homeowners aged 55 or older borrow money using the value of their home. You can get a lump sum or receive regular payments and you don’t need to repay the loan until you sell your home, move out permanently, or pass away. To qualify, you need to live in your home, be 55+, and either own it completely or have a small remaining mortgage.
2. What’s The Best Age to Get a Reverse Mortgage?
If you’re retired and still have a mortgage or your retirement savings aren’t enough, age 55–60 can be a good time to consider it. But if you’re mortgage-free and not in need of extra cash, you might want to wait until you’re around 70–75 to get better value.
3. How Do I Know if a Reverse Mortgage is Right for Me?
Considering a reverse mortgage really depends on your financial situation and future plans. It’s a good idea to work with a mortgage broker who can walk you through your options, show you how a reverse mortgage compares to other solutions, and help you decide if it’s a smart fit for your goals.
4. If My Spouse or Partner is Under 55, Can We Still Qualify?
No, both of you need to be at least 55 years old. Even if only one of you is listed on the home title, being legally married means both of you must meet the age requirement.
5. What Types of Property Qualify for a Reverse Mortgage?
Most home types qualify, including:
- Detached and semi-detached homes
- Duplexes, triplexes, and fourplexes
- Linked homes and townhouses
- Apartment-style condos
- Some modular homes (with certain rules)
Homes on leased land, fractional ownership, or co-ops usually don’t qualify.
6. How Do Lenders Decide How Much I Can Borrow?
You can borrow up to 55% of your home’s value. The exact amount depends on your age (older = more access), the value and location of your home, and the property type. For example: An 80-year-old living in a $500,000 city home would qualify for more than a 60-year-old in a $200,000 country condo.
Other influences include current interest rates, with lower rates potentially leading to a larger loan. The lender will also assess the equity in the home by subtracting any existing mortgages or debts from the appraised value.
7. Will a Reverse Mortgage Affect My Government Benefits or Taxes?
Nope! Because this is a loan (not income), it won’t reduce income-based benefits like OAS or GIS. And it’s not considered taxable income either.
8. Will I Still Own My Home?
Yes. You stay on the title and remain the owner. You can never be forced to move out because of a reverse mortgage. Unlike traditional mortgages, there are no monthly payments to miss.
9. Can I Get a Reverse Mortgage if I Already Have a Mortgage on My Home?
This is actually one of the top reasons people choose a reverse mortgage, it can be used to pay off your current mortgage and free up cash flow. You just need to qualify for enough to cover what you owe. A mortgage broker can help you do the math and see if this is the right move for you.
10. Can I Make Payments or Just Pay the Interest if I Want?
Yes, if you’d like to. You can pay the interest each month, pay up to 10% of the loan once a year, or choose to make no payments at all. The loan is repaid when you sell, move, or pass away. You’ll get time to arrange repayment.
11. What’s Involved in the Application Process?
Applying for a reverse mortgage is usually simpler than applying for a regular mortgage. Lenders will still check your ID, credit, and ask for an appraisal. The appraisal is the first step so they know your home’s value. Your income and credit score don’t weigh as heavily as they do with other mortgages. A mortgage broker can help guide you through the whole process.
12. Are There Any Fees?
There are fees, just like there are with other mortgage options. These can include:
- Home appraisal
- Legal fees
- Setup fees
- Prepayment penalties (if you pay it off early)
Reverse mortgage interest rates are a bit higher than traditional mortgages but much lower than credit cards or payday loans.
13. What if I Want to Sell my Home?
No problem—you can sell any time. The reverse mortgage (plus interest and any fees) is paid off from the sale proceeds, just like any other mortgage.
14. Can I Change My Mind After Signing Up?
Yes, but only before the loan is officially registered on your home. After that, you’ll have to return the money, pay interest, and possibly a penalty.
15. What Happens If I Don’t Keep Up The Terms Of The Mortgage?
If you stop paying property taxes, let your home insurance lapse, or don’t maintain the property, you could default. In that case, the lender may take steps to recover their money, including selling your home.
16. Can I Outlive a Reverse Mortgage?
The answer to this one is no. As long as you live in the home, the reverse mortgage doesn’t need to be repaid. When the term ends, it automatically renews with your lender.
17. What Happens After I Pass Away?
The loan will need to be paid back. If the home is worth less than what’s owed, your estate won’t have to cover the shortfall. Your heirs can either sell the home or refinance it with their own mortgage to keep it.
18. Can I Get a New Reverse Mortgage if I Move To a New Home?
Yes. If you sell your home and buy another one as your primary residence, you can apply for another reverse mortgage, assuming you still qualify.
19. Can I Use a Reverse Mortgage to Buy a Second Property?
You can borrow against your main home and use the money to buy another property, like an income property. But you can’t put a reverse mortgage on the second property alone, it must be tied to your primary residence. Some lenders may allow you to include a cottage if you’re also getting a reverse mortgage on your main home.
20. Can I Refinance a Reverse Mortgage?
You can refinance by replacing it with a new reverse mortgage or even a regular mortgage, as long as the new loan covers the existing balance.
If You’re Considering Taking Out a Reverse Mortgage Or You Have More Questions, Give Me a Call. I Can Help!
A reverse mortgage is a big decision and not one-size-fits-all. If you’re wondering whether it fits your retirement plan, working with an experienced mortgage broker can make a huge difference. I can break down your options, explain the fine print, and help you get the best deal for your situation.
Got more questions about reverse mortgage solutions? Give me a call, I’m here to help. Reach out to me today and let’s get started on a financial plan for your retirement. Book a free consultation with me online or call me at 705-315-0516.