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Essential Things To Know About Reverse Mortgage in Canada
Almost half of Canadians aged fifty and above worry that they will run out of savings during the first ten years of their retirement. With this, it is actually understandable why many people consider reverse mortgages as a perfect alternative to suffice their income. It is important to note that reverse mortgage is mainly designed for the Canadian senior’s changing financial needs.
However, before you consider the reverse mortgage as a great option for you, there are some things that you need first to understand about this mortgage.
How Does It Work?
In contrast to any ordinary mortgage, there is no need for you to make any lump sum or regular payments on a reverse mortgage. Rather, the interest on your mortgage accumulates and equity you have in your property decreases with time. When you sell your home, it is no longer your principal residence and you any need to repay the loan or any interest accumulated.
The amount of loan can be up to fifty percent of your home’s current value. However, you need to pay off any outstanding loan that is secured by your property with the money you receive from the reverse mortgage.
The Advantages of Reverse Mortgage
Reverse mortgage brings several advances. These include the following:
- There is no need for you to make regular loan payments
- You can always turn some of your home’s value unto cash without the need to sell it
- The cash that you obtain is a source of income that is tax-free
- You remain as the owner of your home
The Disadvantages of a Reverse Mortgage
Here are some of the disadvantages of reverse mortgage that you also need to bear in mind:
- It is subject to a higher interest rate than other types of mortgages
- Costs associated with it is often high
- The equity that you hold in your house will decrease
These are just some of the most essential things that you need to keep in mind with reverse mortgage in Canada.
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