Our team is very knowledgeable and patient, especially when it comes to examining and explaining the different options for funding your retirement. We want to ensure you have peace of mind knowing you made the best decision for your present and future situations.
We wanted to take the time to explain the differences between three common options: Home Equity Line of Credits, Second Mortgages and Reverse Mortgages (often referred to as a Seniors Mortgage).
What you need to know about Home Equity Line of Credit:
- You can borrow up to a pre-approved credit limit, on an as-needed basis
- There are no pre-payment penalties
- Must have a minimum down payment or equity of 20% and proof of stable income
- A Home Equity Line of Credit is based on the current value of your home.
- Monthly payments will fluctuate with changing interest rates
- You risk losing your home to foreclosure if you default on the loan
There are many situations where a Home Equity Line of Credit is a great choice for the borrower. If this suits your needs, please contact our friends at Main Street Mortgages who can help you out.
With the strict eligibility criteria for a Home Equity Line of Credit many retirees to choose reverse mortgages which offer less strict rules. Especially when retirees have very minimal income to show and can’t risk paying higher monthly payments if interest rates increase.
What you need to know about Second Mortgages:
A second mortgage is an additional loan taken out on your home with a different mortgage lender. You can access equity in your property by using your home as collateral. You will be required to make the monthly payments on both your first and second mortgage.
Second mortgagees allow quick access to cash and qualifications are based more on your home equity than on your credit score. However, interest rates are typically higher than a first mortgage and if you cannot repay the mortgage your lender can foreclose your home.
Second Mortgages can be a great short-term solution depending on your situation. For more information, please contact our colleagues at Main Street Mortgages.
What You Need to Know About Reverse Mortgages:
- Homeowners aged 55 or older
- Access up to 55% of your home’s value
- Maintain ownership of your home without having to move or sell
- Reverse Mortgages are tax-free cash
- No monthly mortgage payments
Are There Limitations in Using the Funds from a Reverse Mortgage?
No! You can use your Reverse Mortgage to:
- Pay off existing debt
- Renovate your home
- Cover your monthly expenses
Benefits:
- No monthly payments: a lender makes payments to you
- Funds can be available in a lump sum payment, as needed
- Retain ownership of your home
- Tax-Free cash
- Doesn’t affect Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits
Things to Consider:
- There may be appraisal and legal fees to get started
- Interest rates on reverse mortgages are typically higher than conventional mortgages
- A penalty may be incurred for pre-paying a reverse mortgage before it’s due
- If you pass away, your estate will have to repay the loan and interest in full within a set period of time
While reverse mortgages are a great solution to funding your retirement. As with any financial decision, there are a few things to consider before moving ahead.
If you have questions along the way, we are here to help. Our dedicated team of experts have helped hundreds of individuals, couples and families get the reverse mortgage that suited their needs. We don’t believe in a one-size-fits-all solution. We work to truly get to know you, your wants, needs, dreams and goals and work with you to make that a reality. You can give us a call at 905-235-3396 or email info@reversemortgagehelp.ca.
Roger Grubb & Clyde Bryant,
Co-Founders
Reverse Mortgage Help
