The Vast Difference Between Reverse Mortgages In Canada Vs. The U.S.
How much do you actually know about reverse mortgages? Most people know that they are available to help Canadians who are fifty-five years and older with access to equity in their homes tax-free. But many people mistakenly think that Canadian reverse mortgages are just like those offered in the U.S.
Let’s set the record straight.
Reverse mortgages are growing in popularity as an option for homeowners who are fifty-five years of age and older. Unlike in the U.S., where rates and features can fluctuate significantly between several providers of such a product, the leading provider of reverse mortgages in Canada, HomeEquity Bank, is a federally regulated “Schedule 1 Bank.” This means the HomeEquity Bank must follow the same regulatory and oversight obligations as any of the major six banks in Canada. With a trusted and secure bank backing the CHIP Reverse Mortgage, it becomes a great alternative to selling your home and maybe a better-suited lending solution when compared to a second mortgage or a line of credit. Homeowners can retire stress-free, without the worry of monthly payments. Plus, funds are tax-free and don’t impact your OAS (Old Age Security) or CPP (Canada Pension Plan).
Here are some of the key differences that set Canadian reverse mortgages apart from our neighbors to the south:
In Canada:
a. We take a conservative approach and offer up to 55% of your home’s value. This approach provides a “No Negative Equity Guarantee,” ensuring the loan balance never exceeds the fair market value of your home.
b. Closing costs and admin costs are $1,795 plus any standard legal and appraisal fees (similar to any mortgage product).
c. There are no monthly payment requirements.
In the U.S.:
a. The eligibility amount is up to 80% of your home’s value, according to the Federal Housing Authority.
b. Closing and administrative can cost up to a maximum of $6,000 (capped). Lenders in the U.S. can charge the greater of $2,500 or 2% of the first $200K.
c. There are mandatory monthly payment requirements.
Tens of thousands of Canadians already utilize funds from a reverse mortgage to not only supplement their monthly income but to pay off debt, travel, purchase additional real estate, and more!
To learn all about reverse mortgages and how they could work for you, reach out to Mortgages By Erin. You can call me at (647) 885-6940 or email me at erin@mortgagesbyerin.ca for more information. As an experienced mortgage broker in Toronto, ON, I have helped numerous people realize their dream of homeownership by educating them about mortgages and providing them the best options for their needs.
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