Reverse mortgages have become a popular financial option for many homeowners who want to supplement their income. These types of mortgages allow you to convert a portion of your home equity into cash, without having to sell or make monthly mortgage payments. According to Mark Goode, broker and President of Mortgage Man – Dominion Lending Centres (DLC), these types of mortgages can be useful.
“Reverse mortgages aren’t just for retirement. You can use this money for investments or things such as an early in heritance to help family members purchase their own homes,” says Mark.
How Reverse Mortgages Work
A reverse mortgage is a type of loan that allows homeowners to borrow money against the equity in their homes. Unlike a traditional mortgage, where the borrower makes monthly payments to the lender, with a reverse mortgage the lender makes payments to the borrower.
In order to qualify, you must be over 55 years old and have a significant amount of equity in your home. Reverse mortgages allow you to access up to 55% of the value of your home tax-free.
The amount that a homeowner can borrow through a reverse mortgage is determined by several factors, including the value of the home, the age of the homeowner, and the interest rate. The interest is added to the balance of the loan and is paid back when the house is sold. When the loan is repaid, the borrower will receive the remaining equity in the home.
Pros and Cons of Reverse Mortgages
Like any type of mortgage product, there are both pros and cons associated with reverse mortgages.
Mark explains, “A big pro is turning the equity in the home you love into tax free cash while still living in it. There are no monthly mortgage payments required, either. In a normal market, the value of your home increases at the same rate as your mortgage, so by the time you go to sell you would still have the same amount of equity.”
“On the other hand,” he continues, “if the value of your home doesn’t increase, you would lose a bit of equity upon the sale or payout.”
Choosing the Right Mortgage
There are a few options for reverse mortgages, including the CHIP (Canadian Home Income Plan). Mark, who is a licensed reverse mortgage specialist, recommends speaking with him to find the best product for your circumstances.
“We have numerous lenders that offer reverse mortgages and our team is always aware of specials and promotions that are currently going on,” says Mark.
For more information about reverse mortgages, contact the team at Mortgage Man DLC. Visit them online or call (705) 326-8523.. Mortgage Man DLC is located at 180 Memorial Avenue in Orillia.