Understanding the Repayment of Reverse Mortgages in Canada

picture of Michael Huber mortgage broker kelowna slocan british columbia, mountains in background, okanagan lake

As the Canadian population ages, many are turning to reverse mortgages to bolster their retirement funds, manage expenses, or simply improve their lifestyle.

With the leading providers reporting a surge in interest by over 30% in 2022, it’s clear that reverse mortgages are becoming a significant part of retirement planning for many Canadians.

What Is a Reverse Mortgage?

A reverse mortgage allows Canadians aged 55 and older to access up to 55% of the value of their home, without the need for regular monthly payments.

This loan solution is particularly appealing for retirees looking to enhance their income without selling their home.

When and How Do You Repay a Reverse Mortgage?

The flexibility of a reverse mortgage extends to its repayment. You don’t need to repay the loan until you sell your home, move out, or in the unfortunate event of the last borrower’s passing.

However, choosing to repay earlier is possible, though it may incur prepayment penalties depending on the terms set by your lender.

Selling Your Home

This straightforward option involves selling your home to cover the reverse mortgage.

After the sale, the mortgage is paid off first, with any remaining funds going to you or your heirs.

With protections like the No Negative Equity Guarantees, you won’t owe more than the fair market value of your home at the time of selling.

Taking Out a Conventional Mortgage

If you wish to retain ownership of the home, perhaps to keep it in the family or use it as an investment property, repaying the reverse mortgage with a conventional mortgage could be a solution.

This can be complex for retirees without a steady income, but it’s a viable option for those who qualify.

FAQs About Repaying Reverse Mortgages

Who pays back a reverse mortgage?

  • If you’re the homeowner and decide to move or sell, the responsibility to repay falls on you.
  • If you inherit a home with a reverse mortgage, you’ll need to handle the repayment.

Do you make monthly payments on a reverse mortgage?

  • No monthly payments are required with a reverse mortgage, although you can choose to pay interest periodically to prevent the loan balance from growing.

What happens if a spouse or homeowner dies?

  • If both spouses are borrowers, the surviving spouse can continue living in the home without repaying the mortgage immediately.
  • If the surviving spouse isn’t on the mortgage, they might need to discuss options with the lender.

What if you move into long-term care?

  • For Reverse Mortgage holders, if the last remaining homeowner moves into a care facility, they typically have one year to repay the mortgage.

How much can you borrow?

  • The exact borrowing amount depends on factors like the borrowers’ ages, the home’s value, and its location, with a maximum potential borrowing of up to 55% of the home’s value.

Reverse Mortgage Early Repayment Considerations

Paying off a reverse mortgage early is an option, though it’s wise to check potential prepayment penalties.

Contact your Huber Mortgage for specific details related to your mortgage terms.

Reverse Mortgage Repayment

Repaying a Reverse Mortgage is straightforward.

Contact Huber Mortgage to understand if there are any prepayment penalties, determine the total amount due, and discuss the payment process, which may involve legal assistance to clear the title.

Conclusions and Further Thoughts

Conclusion

Reverse mortgages offer significant flexibility and financial relief for many retirees in Canada.

Understanding the repayment process, conditions, and options ensures that homeowners and their heirs can make informed decisions that best suit their financial and personal circumstances.

Contact Huber Mortgage to talk through your options!  Contact HERE.

Sincerely,

Michael

PS – One of my hobbies is blogging about mortgages, debt and government policy.  During the day I’m a MORTGAGE BROKER in Kelowna, BC!

Check out the Huber Mortgage Home Buyers Guide HERE

Huber Mortgage logo black, hubermortgage, michaelhubermortgage, kelownarealestate, kelownamortgagebroker, kelownamortgagecalculator, kelownamortgagerates
Huber Mortgage Free Home Buyers Ebook