Many economic terms have become widely circulated in daily life,
and ordinary people do not have any information about them, including the term reverse mortgage, which is one of the terms that many in Canada wonder about.
This is because it is one of the terms about which there is not much information available,
or due to the lack of awareness of what is included in the mortgage system, and given the importance of the reverse mortgage, you can learn about all the details related to it through this article.
Reverse Mortgage
We can recognize the mortgage system in general as a type of loan that is linked to a property,
and it is granted in Canada to construct a property, purchase a property, or renew a property, for the person to invest through it, and it is usually a long-term loan
It can be defined as a mortgage of real estate or a loan that relates to a mortgage of land in exchange for obtaining a loan, and it is considered one of the most popular guarantees used by creditor parties to be able to obtain the money that they lent to the debtor, and banks are following that way to be able to obtain funds in the form of assets or separate parts.
When the owner does not pay his debts, the creditor gets the property as a substitute for its money,
and the reverse mortgage allows the owner to borrow an amount of money equal to the value of the property to be mortgaged and obtains it from the bank in the form of payments or credit facilities
and the mortgage is prepared so that the amount is paid within a period Specifically imposed by the lender, with the owners of the property bearing all real estate taxes, in addition to the insurance due on the property.
Who is eligible for a Reverse Mortgage?
We can learn about a reverse mortgage that is implemented in Canada, to be able to know
who is entitled to obtain it, as it is a type of mortgage that helps the borrower to reach the actual value.
It is usually offered to elderly homeowners over the age of 62 and does not require them
to make monthly payments to be able to pay off the value of the mortgage loan,
as this type of loan allows homeowners to convert their ownership of homes into a form of cash income.
Without the need to pay the loan installments every month, they get the money
as a fixed monthly payment, or as a credit, meaning that the value of the property is converted into cash,
at rates starting at 3.5% during the year of the value of the property.
The difference between Reverse Mortgage and a Forward Mortgage
There are clear differences between a reverse mortgage and a deferred mortgage so that people do not get confused. Through a deferred mortgage, a person obtains a loan to be able to buy a house, then pays the loan amount to the lender, unlike a reverse mortgage, where he owns The person has the house and does not need to buy it, and he borrows against this house.
Also, he can get the loan without having to pay it back to the lender,
and the balance in the reverse mortgage becomes due and payable in the event
that the owner of the property sells it or in the event of his death,
in which case the borrower gets the excess proceeds when the sale of the property is completed.
For this reason, when presenting a mortgage, the real estate agencies are keen that the lenders make a complete structure for the property to be mortgaged so that the loan does not exceed the amount offered in the property, and so that the borrower or his heirs do not have to bear amounts that excel the value of the house when obtaining a loan greater than the value of the property. This is when the value of the house decreases in the real estate market.
Requirements for a Reverse Mortgage
To be able to take out a reverse mortgage in Canada,
you must meet some of the following requirements:
- Be a homeowner and be over the age of 62.
- You are only required to repay the loan when you move out of a home or in the event of death.
- Also, Prove annually that you are alive and living in the mortgaged house, for the lender to make sure that you are alive and so that the loan does not change to payable.
- Maintaining the payment of real estate taxes regularly, and working on periodic maintenance of the house so that its market value does not decline, and the house continues to maintain its value, and the owner continues to maintain his ownership of the house without ceding it to anyone.
How to receive payments for a Reverse Mortgage Loan
There are many options available to you to get a reverse mortgage loan value in Canada,
you can get a loan amount that is equal to the value of the property in the form of one financial payment, and a fixed interest is charged on the amount, and the balance on the loan will grow over time with Interest must be accruing.
And you can also get periodic payments that are paid to you by the lender, and they are paid once every month, and this system sees period payments and continues throughout the life of the property owner, and there is a third option, which is known as term payments, through which the lender pays money to the property owner within a period Definite like getting it for 10 years.
Also, you can get a line of credit instead of getting cash in an instant form,
and that option allows you to withdraw money at the time you want,
it also enables you to pay interest only on the money you withdraw and not on the entire loan.
Is a Reverse Mortgage Required?
A reverse mortgage loan is paid when the house is sold, after the death of the property owner,
and the materials resulting from the sale are used to pay off the loan, and the loan amount is due in full,
and if the heirs refuse to sell the house
also, they must pay the loan amount in full, or get out of Reverse Mortgage Some reverse mortgages have certain conditions that do not allow the loan to exceed the actual home value.
Read more: Loan portfolios, how to manage them, and their best features
Pros of a Reverse Mortgage
Among the advantages that you can obtain when you obtain a reverse mortgage in Canada are the following:
- You can live in your own home for the duration of the loan,
and also if you suffer hospitalization for 12 months, you will not invalidate the loan. - Also, The lender can allocate some of the proceeds from your loan
so that you can cover the loan expenses when you are unable to do so
if you are unable to pay real estate taxes or insurance. - Through reverse loans, you can get money for any purpose you want,
you can use it for home improvement, or as a source of income every month. - By obtaining income, you can improve your lifestyle
without having to make an effort at the age of over 62 who cannot work hard.
With the desire of countries and their endeavor to provide amenities for the elderly,
a reverse mortgage system was established so that they could obtain money
without the need to pay installments, so they could enjoy the money
and pay it at the end when the property is sold or death occurs