One of the sad facts about the current economy in Ontario is that too many seniors are worried about the state of their retirement funds. Either they had a layoff earlier than they thought, so they weren’t able to salt away as much money for their golden years, or the ups and downs in investment values mean that they don’t have as much interest income coming in, and they’re worried about having to draw against principal.

The power of a reverse mortgages

That’s where the power of a reverse mortgage in Canada comes in. Whether you live in one of the big cities in Ontario, Toronto, Ottawa, Hamilton, Mississauga, or other major center, Amansad Financial has relationships with lenders who provide this sort of liquidity to seniors who have built up significant equity in their homes but find themselves cash-poor because their retirement income is not contributing as much to their budget as they had planned.

How does it work? Think about your house as a giant piggy bank. If you have your house free and clear, then the piggy bank is full of coins. If you have some of the mortgage yet to pay, then your piggy bank has some money in it but has some room at the top. Let’s say that your house appraises at $600,000. Most reverse mortgage lenders in places like Vaughan, Markham, Brampton and elsewhere in Ontario will approve a loan for up to 55% of that appraisal value, which means you could get a loan approval for up to $330,000 in that case. Let’s say you still owe $120,000 on the mortgage — you can still get that reverse mortgage. However, you would only be able to get $210,000 in cash (the $330,000 less the mortgage balance). Your mortgage, though, would be paid in full.

Why only 55%? Once you qualify for the reverse mortgage, you can take out the proceeds however you want. You can get a check for the lump sum, or you can take distributions on a monthly, quarterly or annual basis. Interest begins accruing once you take out money, and over time that interest can grow to take up much of the rest of the appraisal value. However, one of the good things about a reverse mortgage is that you don’t have to make any payments on the loan as long as you (or your spouse, after you pass away) continue to live in the house. Nothing comes due until you both pass away or you move out of the house. At that time, the note comes due. However, most lenders guarantee that, even if so much interest has accrued (or housing values have dropped since the loan) that you can’t pay the whole total with the sale of the house, they will accept the sale price as total settlement of the loan.

For seniors who are worried about their incoming cash but who have built up enough equity in their homes, a reverse mortgage can be a financial lifesaver. Our reverse mortgage experts can provide you with the optimal answer to your liquidity needs. Get in touch with Amansad Financial to learn more.