Reverse Mortgage Information: A Clear Picture of How They Work

Understanding Reverse Mortgages in New Brunswick

Have you heard about reverse mortgages but aren't sure what they are or if one could benefit you? You're not alone. Many homeowners have questions about how reverse mortgages work and whether they're the right choice.

At New Brunswick Mortgage Matters, we believe in giving homeowners clear, honest information so you can make informed decisions about your finances. Here's what you need to know about reverse mortgages.

What Is a Reverse Mortgage?

With a regular mortgage, you make monthly payments to your lender. With a reverse mortgage, the opposite happens. The lender pays you.

A reverse mortgage allows you to convert the equity in your home into cash. You can use that cash for whatever you need, whether that's supplementing your retirement income, covering expenses, helping family, or enjoying your retirement years.

Key Facts About Reverse Mortgages

Here are the most important facts you should know before considering a reverse mortgage:

1. Age Requirements

You must be at least 55 years old to qualify for a reverse mortgage in Canada. If you have a spouse, both of you must meet the age requirement.

2. How Your Loan and Equity Work

When you receive cash from a reverse mortgage, your loan amount grows over time as interest accumulates. Your home equity continues to grow as well, just at a slower pace because of the loan balance.

3. You're Protected From Owing More Than Your Home Is Worth

The amount you owe can never exceed the value of your home. Lenders cannot request payment from any source other than the value of your home. This protects your other assets and your heirs from owing more than the home is worth.

4. When the Loan Is Repaid

You don't make payments on a reverse mortgage as long as you live in your home. The full amount only becomes due when:

• You sell your home

• You move out of your home

• The last surviving homeowner passes away

There may be other conditions that could require earlier repayment. A licensed mortgage broker can explain these so you can avoid any surprises.

5. Home Ownership Requirements

You must own your home (or have significant equity) to qualify for a reverse mortgage. The more equity you have, the more you may be able to borrow.

6. Existing Mortgages and Loans

If you have an existing mortgage or home equity line of credit, you can still qualify for a reverse mortgage. However, the proceeds from the reverse mortgage must first be used to pay off any existing loans secured against your home.

Benefits of a Reverse Mortgage

A reverse mortgage may offer several advantages:

• Tax-free funds that don't count as taxable income

• No monthly payments required while you live in your home

• Stay in your home without selling or moving

• Maintain ownership of your property

• Use the money however you want with very few restrictions

• Flexible payment options including lump sum, scheduled advances, or a combination

• Government benefits unaffected including OAS and GIS

Things to Consider

A reverse mortgage isn't right for everyone. Before making a decision, consider:

• The interest rates are typically higher than traditional mortgages

• Your home equity will decrease over time as the loan balance grows

• Setup costs include appraisal, legal fees, and administrative charges

• Your heirs will need to repay the loan or sell the home to settle the balance

• Other options like downsizing, a home equity line of credit, or refinancing may better suit your needs

Is a Reverse Mortgage Right for You?

A reverse mortgage can be a great solution for some homeowners, but it's important to understand all your options before making a decision. The best way to know if it's right for you is to speak with a licensed mortgage professional who can review your situation and explain your choices.

Get the Answers You Need

Now that you have a clearer picture of how reverse mortgages work, the next step is to find out if one could benefit your situation. Contact Paul Mangion and the New Brunswick Mortgage Matters team today for a free, no-obligation consultation. We'll answer your questions, explain your options, and help you decide if a reverse mortgage is the right choice for you.

Serving Homeowners Across New Brunswick

We help homeowners understand reverse mortgages in communities throughout New Brunswick, including:

• Fredericton

• Moncton

• Saint John

• Dieppe

• Riverview

• Quispamsis

• Rothesay

• And surrounding areas
  

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