Articles and Blogs

January 2^nd 2022 - Philip Roe

A growing number of Canadians are turning to reverse mortgages as a way to fund their post-retirement needs. But what does it take to qualify for a reverse mortgage? That is perhaps one of the most important questions that Canadians nearing retirement need to ask when the time comes.

The great thing is that you don’t need much to qualify for a reverse mortgage. We will go over those qualifications and what it could mean for those nearing retirement who need access to additional funds.

Do I Qualify for a Reverse Mortgage?

There are a few baseline factors that need to be met in order to qualify for a reverse mortgage. The first is that you have to own your home. Moreover, it generally has to be a single-family home, though there are some exceptions where you may qualify for a reverse mortgage otherwise.

Another important factor is that anyone on the title needs to be at least 55 years old. So, if you and your spouse are on the title to the home, you both need to be at least 55 years old in order to qualify for a reverse mortgage.

There are other factors that come into play but those are the two main qualifications that need to be checked off. It is important, however, to understand what those other factors are that will be assessed by the lender.

Qualify for a Reverse Mortgage: What the Lender Will Look at

After the two main prerequisites are crossed off the list, there are a few other aspects that will come under consideration from the lender. For instance, your age is important. Old Canadians tend to qualify for larger loans than those right at the 55-year-old mark.

Additionally, there are factors within the home itself that bear consideration. The first is the type of home that you have. As stated, reverse mortgages predominantly revolve around single-family homes, though your lender may make an exception. If you have something other than a single-family home, talk to the lender first. They may be willing to work with you based on your unique conditions.

There is also the location of your home. Is your home in a good area that will promote growth in equity and value? If not, it could hinder the amount that you are approved for and even your chances of approval altogether.

The condition of the home is a major factor as well. Older homes that are outdated or in serious disrepair may run the risk of not qualifying for a reverse mortgage. Even if you still qualify, it could severely hinder your qualifications.

Appraisal and Equity

The two most important things when qualifying for a reverse mortgage are having equity in the home and the current appraised value of said home. Simply put you cannot qualify for a reverse mortgage if there is an outstanding loan on the home.

That loan, generally a mortgage, needs to be paid off prior to application or needs to be able to be paid off using the funds from that reverse mortgage. If you can’t meet that criteria, a reverse mortgage is not for you.

During the application process, you will also need a home appraisal. It does not matter if you’ve had one recently; a current appraisal is required. This will give the lender a better idea of what your home is worth and how much you could potentially qualify for.

Turning Your Home Equity into Cash

When the approval process is over, you may be able to turn up to 55% of your home’s value into much needed cash. Even better, that cash is tax-free and can be spent on anything that you choose. Home renovations, medical bills, or even daily bills; you can use the money to fit your needs.

Perhaps the best thing about a reverse mortgage is that there is no required payment during the life of the loan. It comes due under one of the following conditions: selling the home, moving out for any reason including assisted care, defaulting on the loan, and when all of the titleholders have passed away.

In the event of the latter, the estate would then be responsible for paying back the reverse mortgage. Generally speaking, they would have 180 days but that can vary based on lender. There may also be prepayment fees, so be sure to check with the lender before moving forward.

The major selling point for a reverse mortgage is that there is no need to sell your home. Far too often, seniors are put into a position where they need cash and the only way to meet the demand is by selling their home.

With a reverse mortgage, getting the money needed for post-retirement living is easier than ever. And most importantly, borrowers can keep their home without having to give selling a second thought.

Who Do I Talk to About Being Able to Qualify for a Reverse Mortgage?

The first thing that you should do if you want to discuss a reverse mortgage is call Lotus Income. We are here to get you the most equity out of your home and put the most money into your pockets.

Reverse mortgages can seem like a complicated endeavor, so it is important to discuss all of your options first. We can run through the pros and cons of reverse mortgages and determine if it is the right fit for your needs.