Reverse mortgages, also known as lifetime mortgages, are an alternative way to fund your retirement and stay in your home. Say you have a home worth $300,000, but no retirement savings. You don’t want to have to sell your home and then spend the best years of your life with living standards that are less than the ones you enjoy now; this is where a reverse mortgage comes in. You’ll be able to supplement an existing retirement plan, medical bills, day to day expenses and more. You can convert a portion of the equity in your home into cash; you won’t have to leave your home or pay it back.
Who is Eligible?
This kind of home equity loans is only available to persons of retirement age and older. You must own your home outright (no mortgages, liens or other issues on the property) or have a very low mortgage balance that can be paid off quickly with whatever you borrow against the home. The third most important thing is that the home must be your primary residence where you live. If you meet all of these criteria, you’ll want to speak with one of our Toronto mortgage brokers to see if it’s right for you.
What are the Differences Between a Reverse Mortgage and a Home Equity Loan?
A home equity loan is something that you have to repay or you can lose your home. A reverse mortgage on the other hand isn’t repaid during your lifetime. If you borrow 20% of your home’s equity, when your estate is settled the home will be sold and the 20% will be repaid. You’re not going to have to pay money back, but when your affairs are settled later. This means you’re going to be able to get the money you need to live comfortably now, but you won’t have to leave your home.
What’s the Downside?
You’re going to have to stay in that house or you’re going to have to sell the property and repay the loan. This means if you have to move to a retirement village or somewhere with a higher level of medical care, you’ll need to sell your home. You’ll want to make sure that you’re going to stay in this house for the rest of your life, or at least the best parts of it. This way you won’t have to sell your home and you can use the equity in your home as you see fit. It’s really the best way for most of us to make equity liquid.
Before you consider a reverse mortgage, you’re going to want to talk with someone who understands how they work. We as Toronto mortgage brokers can help you find the right financial solution for your equity. Why lose a 1/3 of your equity now just to sell your home when you can get as much money as you need out of your home and stay in it? Be comfortable and use your equity the way you want to!
Contact us today to learn more!