A Reverse Mortgage in Toronto - Advantages and Disadvantages

A Reverse Mortgage in Toronto - Advantages and Disadvantages

Homeowners aged 60 and older can obtain a reverse mortgage in Toronto, Ontario as well as all the other provinces in Canada. HomEquity Bank offers the Canadian Home Income Plan (CHIP) which is the primary source for most Canadian reverse mortgages. Be sure to check with your financial institution or bank about other options. The lender looks at the equity in your home, the appraised value, your age, where you live and current interest rates to determine how much you qualify for. The older you are means you can get a larger loan. This allows older homeowners to obtain needed cash without selling their home.

In contrast to an ordinary mortgage, a reverse mortgage in Toronto requires no regular payments from you or your spouse for as long as you live in the house. The interest on the loan accumulates while the equity decreases over time. If you decide to sell the house, the loan must be repaid along with any accumulated interest. The loan amount is usually between ten and forty percent of the value of your home. However you are required to pay off all outstanding loans with the reverse mortgage funds you receive.

There are several advantages to obtaining a reverse mortgage in Toronto. As mentioned, you do not have to make regular payments on this loan for as long as you live in the house. It is an easy way to turn part of your home's value into cash without selling it, so you maintain ownership of the house. The borrowed money is tax free and it does not affect any benefits you may receive such as Old-Age Security (OAS). You may receive the money as a lump sum or as planned advances or payments that simulate a regular income.

Disadvantages of a reverse mortgage in Toronto include that it has higher interest rates than other mortgage types. Also, your equity decreases as the loan interest increases over the years. If you die your estate has to repay the loan with interest in a limited time period. That means there will be less money for your children and other heirs. Some of the costs involved in obtaining this type of loan are considered to be rather high. As mentioned, there is a higher interest rate than with a traditional mortgage. You also have to pay for a home appraisal, a closing fee and legal fees.

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