Reverse Mortgage Meaning is explained in full here – Are you a homeowner and approaching retirement age? and would want to convert your home equity into cash. You’ve got to read about Reverse mortgages.
Real Reverse Mortgage Meaning is Explained Below
A reverse mortgage is a loan that gives access to 62years of age homeowners, borrows against their equity, or is in line to get cash from a lender.
How Much money can I get from a Reverse Mortgage?
It’s $679,650 as of the year 2018. Although, you can’t use more than 80% of your home’s equity based on its appraised value, and it depends on how much home equity you currently have.
How Can I pay back a Reverse Mortgage I Lend?
The best and most popular Reverse Mortgage repayment is by selling off your home.
Reverse Mortgage Pros And Cons
Below are the Reverse Mortgage benefits (Pros) you need to know
- It Helps Secure Your Retirement
- You still owned the home. Your name stays on the title.
- You Won’t Have Tax Liability: Payments from a reverse mortgage loan are never considered taxable income.
- If the lender dies, non-lender spouses who are not mentioned on the mortgage may still live in the home.
Below are the Reverse Mortgage Disadvantages (Cons) you need to know
- You must be 62years of age before you can get for Reverse Mortgage
- The requirement for Reverse Mortgage entails mortgage insurance.
- If you didn’t make repayment before the due date, the loan cash will increase as interest accumulates.
- This type of loan is quite complicated, meaning they’ve got a lot of rules that cover the all process and the risk may not be worth the extra cash you will repay.
Before taking a Reverse Mortgage loan, you must have understood and observed carefully the Pros and Cons because this type of loan may put you at high risk in the long run if not taken seriously. Although Reverse Mortgage loans give you more cash in retirement.
Reverse Mortgage Canada Dangers You Need to Know
As reverse mortgages can help financial flexibility for all, it’s important to also be aware of its potential risks and dangers associated with this type of loan so you wont be trapped.
Top 6 considerations to Reverse Mortgages in Canada
1. Accumulating Interest: With a reverse mortgage, the interest on the loan is added to the principal amount over time. Meaning that the total debt can grow significantly over the life of the loan, and potentially reduce the equity in your home and leaving less inheritance for your heirs.
2. Decreasing Home Equity: Reverse mortgages allow homeowners to access the equity in their homes, meaning that the amount of equity which are available for other purposes, such as downsizing or using the home as collateral for other loans, and also diminishes over time.
3. Repayment Obligations: While you are not required to make regular mortgage payments on a reverse mortgage, you are still responsible for certain obligations like property taxes, home insurance, and also the maintenance costs. Failure to meet these obligations can result in default and potential foreclosure.
4. Impact on Government Benefits: If you receive means-tested government benefits, such as the Guaranteed Income Supplement or Old Age Security, the funds received from a reverse mortgage could surely affect your eligibility for these benefits.
5. Limited Borrowing Capacity: The amount you can borrow with a reverse mortgage is based on factors like your age, home value, and also the interest rates. while this may limit the funds which is available for you, most especially if you have a high-value property.
6. Potential Loss of Home: If you do not meet the terms of the reverse mortgage, such as paying property taxes or maintaining the home, the lender has the right to demand repayment and may also ultimately initiate foreclosure proceedings.
So, kindly check thoroughly and understand the terms, costs, and risks associated with a reverse mortgage before entering into such an agreement.