As you get older, having additional income can become increasingly difficult, especially if you live off fixed payments. Although a few different lending options are available, some people may take advantage of their existing home equity by applying for a reverse mortgage.
Consulting a mortgage expert can help you learn more about your current options and determine the best financial plan for you. Before jumping straight into a reverse mortgage, however, there are a few things you should know.
What is a reverse mortgage?
A reverse mortgage allows you to borrow money by using your house as collateral. This option, on average, gives you access to approximately 55% of the current appraised value of your home in situations where you need immediate cash.
In return, interest and fees are added to your loan balance each month, causing your mortgage loan balance to increase and home equity to decrease.
Unlike a traditional mortgage, you only pay back the reverse mortgage if you move from your home because of death or selling the home. Even though you’re not required to make regular payments, you must continue paying homeowner’s insurance and property taxes, in addition to keeping the property in good condition.
To qualify for reverse mortgage rates in Canada, you must be fifty-five years old or older.
What are your alternative borrowing options?
There are a few different options to consider when you’re looking to receive a reverse mortgage.
One of the first—but often not recommended—avenues is using your credit card to take out money. Most financial experts would suggest against this because it typically comes with high interest rates and can possibly have a negative effect on your overall credit.
Instead, if you are still working, you should consider applying for a line of credit because the bank can more easily verify your income, and it usually offers a higher amount before you retire.
Reverse mortgage rates should be used as a last resort if you are ineligible for a line of credit or other borrowing options. When you don’t have the credit score to support an additional loan or have acquired too much debt, a reverse mortgage could be the best solution.
What can a reverse mortgage be used for?
There are several different instances where reverse mortgage rates can be utilized. Whether you’re experiencing a lower income due to retirement, have recently adopted a fixed income, or are facing another financial struggle, getting a reverse income could help. These instances include:
- Supplementing your lifestyle
- Increasing your monthly cash flow
- Consolidating debt
- Buying another property
- Covering medical expenses
- Renovating your home
- Taking a long-awaited vacation
How do you gain access to your money after a reverse mortgage?
Reverse mortgage rates offer financial flexibility when it comes to your money. Once approved, you can determine exactly how you would prefer to receive your funds. Whether you would like to have the full amount all at once as a lump sum or spread out into regular monthly deposits is completely up to you.
What fees are associated with a reverse mortgage?
There are a few potential fees you need to consider when inquiring about reverse mortgage rates. Be sure to consider potential appraisal fees, independent legal advice, and closing and administrative costs.
However, once your reverse mortgage is set up, the money you receive is entirely tax-free and requires no monthly mortgage payments.
How to Get a Reverse Mortgage
Get in touch with one of our mortgage experts at Northwood Mortgage today to learn more about how to receive a reverse mortgage and the current reverse mortgage rates. You can call us at 416-969-8130 or contact us here.