Thousands of Canadian homeowners have turned to reverse mortgages in order to tap into some of the home equity they’ve spent their lives building.
Depending on your financial situation and unique needs, cash-strapped retirees may find it easier to qualify for and access tax-free cash through a reverse mortgage, compared to some of the more difficult qualifications required of a personal loan or a home equity line of credit (HELOC).
What is a reverse mortgage?
Unlike a conventional mortgage that requires you to make payments that build equity in your home, a reverse mortgage offers a simple way for older homeowners to access some of their hard-earned home equity—without required monthly payments.
If you’re curious about whether you’d be eligible for a reverse mortgage, you may be surprised how easy it is to qualify—here’s how it works.
Who qualifies for a reverse mortgage?
While there are other financial options to ease financial burdens in retirement, many are difficult for older Canadians to qualify for. A personal loan or home equity line of credit (HELOC) often come with income and credit score requirements, which can pose a challenge for those on fixed retirement incomes.
And with 95% of Canadians wanting to age in place*, a reverse mortgage is a viable—and simpler—option for making that happen. Reverse mortgage eligibility is easier, as it’s based on your age, location, and property value. In order to qualify, you must:
- Be a homeowner aged 55 or older (note the older you are, the more tax-free cash you can access)
- Live in your primary residence at least 6 months of the year
- Have a home value of at least $250,000
If you have a conventional mortgage, you may still qualify for a reverse mortgage and can use the proceeds to pay off your existing mortgage. This can free up monthly cash flow, as no monthly payments are required with a reverse mortgage.
Your primary residence need not only be a single-family detached home—your condo, duplex, row house, semi-detached, or townhouse can qualify. On the other hand, modular homes, and cottages or secondary homes cannot.
To qualify with Equitable Bank, your home must be in a major urban centre in Alberta, British Columbia, Ontario, or Quebec, and you may be eligible to borrow up to 59%.
How to apply for a reverse mortgage
The reverse mortgage application process will differ across lenders. At Equitable Bank, application to funding can take as little as 30 days—here’s how it works:
Step 1: Apply
Your specialist will review your application—and you could have conditional approval in as little as 1 day.
Step 2: Submit your paperwork
Once you submit your requested documents, we’ll order an appraisal for your home.
Step 3: Connect with your lawyers
Review your agreement with your closing and Independent Legal Advice (ILA) lawyers.
Step 4: Receive your funds
On your selected date, we’ll deposit your reverse mortgage funds into your account.
The next step is simply to use your funds!
With the ability to access up to 59% of your home’s value and simpler eligibility criteria, a reverse mortgage can be a strong alternative to other loan options available to retirees today.