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Reverse Mortgage in Canada Misconceptions
Myths and Facts of a Reverse Mortgage in Canada
Myth: The lender owns your home.
Fact: You remain the owner of your home. All you are required to do is pay your property taxes (or officially defer them under the appropriate program in your province) and any other maintenance fees required as well as maintain your property and be sure to have proper fire insurance.
Myth: You will have to pay taxes on the money you get from a reverse mortgage
Fact: In Canada the money that you receive from the Canadian Home Income Plan or any reverse mortgage in Canada does not qualify as taxable income and will not affect any government benefits that you currently receive including the Old Age Security and Guaranteed Income Supplement.
Myth: If I have poor credit I won’t qualify for a reverse mortgage
Fact: In order to qualify for a reverse mortgage in Canada you do not need to have good credit. The only requirement is that everyone on title is 55 years or older.
Myth: The fees and closing costs for a reverse mortgage in Canada are very high.
Fact: The fees to register a reverse mortgage are much the same as any other mortgage product. There is the appraisal fee and the fee for your independent legal advice. Appraisals can range from $300 to $500 and the legal advice typically costs $300 to $600 depending on who you hire. Other fees that are incurred are for the conveyance, closing and administrative costs which have a flat fee of $1595 to $1,795 (depending on the lender) and are deducted directly from your reverse mortgage proceeds and therefore are not out-of-pocket.
Myth: I can be forced out of my home.
Fact: You can remain in your home for as long as you like. You will not be required to pay back the loan unless you or your spouse (on title) sell your home, move out or both pass away.
Myth: If I pass away the bank will own my home and my heirs will be left with nothing.
Fact: Your heirs will not be required to sell the house after you pass away and will have the option to pay back the reverse mortgage and keep your home if they choose. The exact same procedure your estate would follow for any type of mortgage registered on title.
Myth: If I pass away the bank will own my home and my heirs will be left with nothing.
Fact: Your heirs will not be required to sell the house after you pass away and will have the option to pay back the Canadian Home Income Plan reverse mortgage and keep your home if they choose.
Myth: There are restrictions on what you can and can’t use the money for.
Fact: You can use the money for what ever purpose you choose whether it be a new roof on your home, gifts for your grandchildren or a special trip for you and your loved ones!