by Nutan Brown
on Monday, April 4th, 2022 at 9:14am.
Buying a home will likely be the single largest purchase of your life. With home prices on the rise across Canada, finding the right financial solution to secure your perfect home can be challenging. By knowing all your options, you can ensure that you find the perfect home at a price you can afford.
One option you have when purchasing a home is a reverse mortgage. Unlike a traditional mortgage where you submit monthly payments to build equity in your home, a reverse mortgage is the opposite. In a reverse mortgage, the bank will make payments to you in exchange for equity in your home.
A reverse mortgage is exclusive to Canadians over the age of 55. In a reverse mortgage situation, the homeowner can borrow as much as 55% of the current home’s value. The borrower receives the money and does not have to make any payments on this loan until they either sell their home or pass away.
There are several benefits to this type of mortgage. For one, you will receive a lump sum of cash without monthly payments. Additionally, the money received is not taxable, and it will not affect the Old-Age Security or Guaranteed Income Supplement benefits. On top of this, you still own your home when taking out a reverse mortgage, and you get to choose how and when you will receive your money.
There are also some drawbacks to consider, including the costs associated with it. A reverse mortgage can include a higher interest rate than a traditional mortgage. Also, if the homeowner happens to pass away, the estate will have to repay the loan and interest in full. This situation can place a significant burden on loved ones during a time of grieving.
Whether or not you choose a reverse mortgage will depend on your specific situation. If you are considering a move, and want to learn more about your best financial options, feel free to contact me for some professional advice.