Get The FREE, Comprehensive Booklet on Reverse Mortgages
A reverse mortgage is a loan borrowed against the value of a property. For Canadian homeowners 55 or older, you may borrow back up to 55% of the equity invested in a property. Unlike traditional mortgages, no monthly payments are required. The money borrowed is tax-free and may be used at your discretion.
Factors under consideration during a reverse mortgage include:
- Age of all homeowners (Both you and your spouse must be 55 or older.)
- Age and condition of the property.
- Appraisal of house.
- Current equity level.
- Location of property.
When you obtain a reverse mortgage in Edmonton, the amount borrowed is due back when you move or sell the property.
Common Questions About Reverse Mortgages
Reverse mortgages have evolved from a needs-based product to a product that many financial planners highly recommend as an important component of a comprehensive retirement plan. However, at Alberta Mortgage, we hear plenty of misinformation about reverse mortgages in Edmonton. and we want to set the record straight. Below, commonly asked questions are answered, and myths are separated from the facts.
Question: In a Reverse Mortgage, does the bank own the home?
Answer: No – the homeowner always maintains title ownership and control of their home in a reverse mortgage. The homeowner also has the freedom to decide if and when they’d like to move or sell their home in a reverse mortgage.
Question: Do those with a Reverse Mortgage really owe more than their house is worth?
Answer: Actually, HomEquity Bank’s lending practices allow clients to take a maximum of 55% (33% on average) of the home’s appraised value. In fact, 99% of HomEquity Bank’s clients have equity remaining in the home when the loan is repaid.
Question: Is it true that Reverse Mortgages are too expensive because the rates are so high?
Answer: HomeEquity Bank rates are modestly higher than regular mortgages because there are no payments required, with HomEquity Bank offering rates as low as prime +1.25%.
Question: I’ve heard that a Reverse Mortgage is a last resort solution, is that true?
Answer: Many financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it’s tax-free money, it allows retirement savings to last longer.
Question: Is a Home Equity Line of Credit (HELOC) a better option than a Reverse Mortgage?
: HELOCs are a good short-term borrowing option
for people who can pay the interest and loan in the near future. However, HELOCs are callable loans and there exists significant risk of non-renewal or cancellation. In comparison, a reverse mortgage is a long-term financial solution that won’t be called based on economic changes such as interest rates
increasing, property values decreasing, or a change in the homeowner’s income. Additionally, money from a reverse mortgage provides the ability to prolong retirement savings.
Question: In a Reverse Mortgage, can the bank really force the homeowner to sell or foreclose at any time?
Answer: No. Reverse Mortgages provide peace-of-mind that the homeowner can stay in their home for as long as they’d like. A reverse mortgage is a lifetime product – as long as property taxes and insurance are in good standing, the property remains in good condition, and the homeowner is living in the home, the loan won’t be called even if the house decreases in value.
Question: If a homeowner has an existing mortgage, are they unable to get a Reverse Mortgage?
Answer: No, you’re able to have both a Reverse Mortgage and an existing mortgage at the same time. In fact, many of our clients use a reverse mortgage to pay off their existing mortgage and debts, freeing up cash flow for other things.
Question: If a Reverse Mortgage holder passes away, is a surviving spouse stuck paying the loan?
Answer: Surviving spouses can choose to remain in the home without having to make a payment, unless they choose to sell the home.
*Accurate as of December 2019. Some restrictions may apply.
Facts About Reverse Mortgage
When you apply for a reverse mortgage in Edmonton, there are a few things you should know. Such as:
- Reverse Mortgages are Tax-Free – This provides flexibility for retired seniors to stretch their savings further.
- You Control When the Loan is Repaid – Homeowners are never forced by the bank to repay a reverse mortgage in Edmonton if insurance is intact and property taxes are always paid.
- You Receive Your Loan on Your Terms – Reverse mortgage borrowers can choose to receive cash in a lump sum or partial monthly payments.
- There are no Monthly Payments to Make – There are no monthly payments on a reverse mortgage in Edmonton. Payment isn’t due until you move or sell.
How is a Reverse Mortgage in Edmonton Useful?
Homeowners use reverse mortgages in a variety of ways. Some pay off the remaining mortgage debt, while others use it to pay bills and retire comfortably. The way you spend your loan is entirely up to you. Some of the ways our clients use reverse mortgages include:
- Travelling with friends and family.
- Updating and renovating the home.
- Paying monthly bills and expenses.
- Paying off and restructuring other debts.
- Helping family in need.
If you’re interested in learning more about obtaining a reverse mortgage in Edmonton, contact Alberta Mortgage at 1-800-398-1891. Or fill out our online contact form here.