There’s no getting past it. More and more people are entering their “golden years.” If this is you, most likely your kids have left the nest and you’re either retired or approaching retirement age.
One of the things the aging population is doing is using the equity in their homes to build more comfortable financial lives as they move toward their later years. Reverse mortgages have never been more popular. In fact, applications have nearly tripled in only a year’s time. The outstanding balance on these types of loans nationwide sits at about $3.12 billion, according to Canada’s bank regulator.
Seniors Becoming More Active in Real Estate
The Canada Mortgage and Housing Corporation (CMHC) says more seniors have their foot in the door when it comes to properties and are investigating their options. Seniors are choosing to buy homes and to stay in the ones they own, rather than shuffling off to seniors’ residences or homes for the aged.
CMHC indicates that heightened senior participation in an increased labour force is the greatest factor in heightened homeownership among seniors.
The Canadian government makes it pretty simple for seniors to qualify for reverse mortgages.
Five things lenders typically review regarding reverse mortgages include:
- The equity you have in your home
- Your age
- Your home’s appraised value
- The location of your home
- The current interest rate.
If you’re 55 years of age or older and you have equity built up in your home, you most likely will qualify. If you do, you can borrow up to 55 percent of your home’s value.
Clearly, senior homeowners who go the reverse mortgage route have weighed the pros and cons and experts predict that the reverse mortgage segment will increase by about 25 percent a year.
Seniors are a Part of Canada’s Debt Phenomenon
Many seniors are moving into retirement carrying debt. Rent costs have escalated across the country and downsizing has become more difficult. Reverse mortgages are appealing since they offer an additional income source. Only two lenders, however, offer them in Canada: HomeEquity Bank and Equitable Bank. These mortgages come with a price, though—higher interest rates than conventional loans—but that hasn’t been off-putting for seniors.
Those who decide to utilize the reverse mortgage option can’t be late with payments since payments don’t exist. Borrowers can, however, be in default of a reverse mortgage if they don’t pay taxes or insurance on their homes or let their homes fall into disrepair.