12 Feb 6 Myths and Facts of Reverse Mortgages
Over years of owning a home and making mortgage payments, you’ve built a nicely-sized nest egg of home equity. However, that portion of your net worth is essentially untouchable until you choose to move or sell your home. A reverse mortgage allows you to borrow against your home’s value to pay off existing debt, make home improvements or cover other expenses.
Reverse mortgages are considered “reverse” because instead of making mortgage payments, the loan provides payment to the borrower. Borrowers can receive funds in installments or one lump sum, and also have the flexibility to repay the principal and interest in full at any time. Here are some common “myths” and facts about reverse mortgages:
1) MYTH: Anyone can get a reverse mortgage.
FACT: Only Canadian homeowners 55 or older can get a reverse mortgage. Other qualifications include your property type, location and market value.
2) MYTH: To get a reverse mortgage, your home must be completely mortgage-free.
FACT: You don’t need to be completely mortgage-free to get a reverse mortgage. In fact, some borrowers use reverse mortgages to pay off existing mortgages and debts.
3) MYTH: I will have to pay taxes on the money I receive.
FACT: All money you receive for a Canadian reverse mortgage is tax-free. These reverse mortgages don’t affect Old Age Security or other government benefits you may already be receiving.
4) MYTH: I will have to make monthly payments on what I borrow.
FACT: You don’t have to make monthly payments on the money you borrow (interest or principal payments alike) until you choose to move or sell your home.
5) MYTH: A reverse mortgage will allow me to borrow without limits.
FACT: A reverse mortgage allows you to borrow up to 55% of your home’s value. This protects a borrower from borrowing too heavily against a home’s value.
6) MYTH: I may be forced to move as a result of a reverse mortgage.
FACT: Because you aren’t required to make monthly payments, you’ll never be required to sell or move as a result of changing home values. The amount you will eventually have to repay won’t exceed the fair market value of your home when it’s sold (provided you properly maintain your property).
Interested in figuring out if a reverse mortgage is right for you? Contact Capital Mortgages today to learn more about reverse mortgages and get a free quote.