Reverse Mortgage.

A reverse mortgage does not have scheduled payments. As a reverse mortgage is not on a fixed repayment schedule, often referred to as an amortization schedule, the principal and interest compound during the mortgage term. In other words, one’s mortgage balance continues to grow for as long as one has a reverse mortgage. A reverse mortgage does not affect Old Age Security or Guaranteed Income Supplement benefits. Homeowners age 55+ can access up to 55% of the value of their equity, depending on the property type, location, condition, appraised value and most importantly, the age of the homeowners. The homeowner’s age will determine the maximum qualifying loan-to-value. The younger the homeowner, the less they can borrow. Whereas, the older the homeowner, the more they can borrow, provided the loan to value does not exceed 55% of the home value as determined by an appraiser. Interest rates are typically higher than traditional mortgages or home equity lines of credit interest rates and are generally lower than private mortgage rates. One reason is the simplified approval process and how a reverse mortgage is an option for those unable to qualify for a traditional mortgage based on their income levels, which usually drastically reduces as homeowners enter an older age bracket or retire. For instance, a retiree might not be able to pass the mortgage stress test with a traditional mortgage lender. A reverse mortgage allows Canadians age 55+ a method to access their home equity and side-step restrictive bank underwriting guidelines while battling what seems to be a relentless increase in the overall cost of living in Canada, especially when pension, benefits and retirement savings barely scratch the surface. Funds are typically advanced in one of two methods: one lump sum advance or multiple advances paid to the homeowner over time.