Firstly, we must explain exactly what a reverse mortgage is; who can be affected by it and would it be an advantage for you! Briefly, a reverse mortgage in Guelph is a financial product that permits homeowners aged 55 years and over to borrow 50% of their home value, secured by the equity in it. This type of loan provides the advantage of being able to pay outstanding debts or make home improvements, such as outstanding repairs and renovations. It is also a means of gaining funds to take extended vacations or possibly fulfilling a particular dream.
However, you will probably be wondering about the pros and cons of a reverse mortgage which initially seems to have many and exciting advantages! We can begin with the pros:
- The amount you borrow is tax-free
- A Guaranteed Income Supplement or Your Old Age Security is not affected
- Proof of income is not required
- No regular mortgage repayments are necessary
- Repayment is only required if you sell your home, or in the event of death.
Are there cons?
There is a flip side to every coin and where there are advantages there are also disadvantages because we don’t live in a perfect world! For a start, there is only one source offering reverse mortgages, and that is the “Canadian Home Income Plan (CHIP)” promoted by the HomEquity Bank. For further information on this aspect, contact a qualified professional in Guelph on reverse mortgages. The “cons list” continues:
- Interest rates are significantly higher than usual mortgage rates
- The more equity you borrow, the interest increasingly accumulates
- Setup costs, such as home appraisal and application fees, closing costs and others, are deducted from the amount you receive
- You only escape from a reverse mortgage if you sell your home, or die!
- Should you sell your home or pass away within 3 years of you taking out a reverse mortgage, the full loan amount and interest must be repaid within a determined time.
Guelph reverse mortgage qualification
The government of Canada has made it relatively simple for senior homeowners to qualify for Guelph reverse mortgages. All that is required is confirmation of your age:
- The total equity in your home
- Appraised home value
- Location of the home, particularly the city
- Current interest rate paid
Is a reverse mortgage good for you? Contact Mortgage Guys in Guelph today before making any decision!