Top 8 Questions About Reverse Mortgages

Mortgage Tips Trina Kieswetter 13 Apr

(Written by Mich Sneddon, CPA, CA – Reverse Mortgage Pros)

Having completed dozens of reverse mortgage deals, there are some questions that I find I get over and over again.
So today I thought I’d write a piece on the 8 most common reverse mortgage questions that people in Canada have regarding reverse mortgages.

1. if i have an existing mortgage on the property, can i get a reverse mortgage?

Not only is this the most common question regarding reverse mortgages, it is actually one of the most common uses for a reverse mortgage – to pay off the current mortgage and eliminate that payment and help with monthly cash flow. However, it is important to realize that you would need to qualify for enough to pay that existing mortgage in full.

For example: If you have $70,000 remaining on the mortgage, you would need to qualify for at least $70,000 to be eligible for a reverse mortgage. If you owe $70,000 and qualify for $100,000 in reverse mortgage funds, the $70,000 would be paid first and you would be left with the remaining $30,000.

The good news is that the reverse mortgage funds can also be used to pay any penalties or charges for paying out your mortgage as well. However, the existing mortgage must always be paid off using the reverse mortgage funds and you get to keep whatever is left. Essentially, you are swapping your mortgage with a reverse mortgage and keeping the excess cash.

2. can i pay the interest or make payments on the amount i receive?

Yes, you can make monthly interest payment if you choose and you can also pay up to 10% of the amount borrowed (1 payment per year) if you wish.

However, you also have the option to pay nothing at all until you sell the property or until you pass away. Most people choose this option but it is nice to know that you can pay the interest every month (essentially turn the reverse mortgage into the same thing as a Home Equity Line Of Credit).

3. how do you determine how much i qualify for? i thought i could get 55% of my home value?

This is a common question that we get. It is important to note that you can qualify for up to 55% of the value of the property and not everyone will get this amount. The words ‘up to’ are very important in this statement.

To determine how much you qualify for, four different factors are used: The ages of all applicants, the property value, the property location (postal code) and the property type.

Here is a quick example for all 4 factors: Someone aged 80 will qualify for more than someone aged 60; someone in a city will qualify for more than someone in the countryside; someone with a property value of $500,000 will qualify for more than someone whose value is $200,000 and someone who lives in a detached house will usually qualify for more than someone who lives in a Condo.

4. i’m 60 but my wife is 53, can we still qualify?

Unfortunately, no. Both applicants need to be 55 or over to qualify. Even if just one of you is on the title, because it is deemed a ‘matrimonial home’ (meaning that the husband and wife both have a legal right to the home, by nature of being married) both of you need to be 55 or over.

5. what is involved in the application?

Reverse mortgages aren’t as difficult a process to go through as a traditional mortgage. However, you aren’t going to simply be given the money either – remember you are still talking about large amounts of money here and the lender is a Schedule A bank.

Your credit score and income are not usually significant factors in the application – but the lender will still check these. In addition to this, proof of identity and other such paperwork is required.

An appraisal is always required and is the first step – so the lender can identify the market value of your home and therefore how much they can lend. However, it is possible to get a ‘quote’ before this.

6. what if i want to sell my home?

You can sell your house at any time if you have a reverse mortgage. The mortgage amount (plus any accrued interest and prepayment penalties, if any) would then be paid from the proceeds of the sale. The process would be exactly the same as if you had any other kind of mortgage or HELOC on the property.

7. will i still own my home?

Yes, you will remain on the title for as long as you or your spouse live in the property and you can never be forced out of your home because of a reverse mortgage. In fact, from this point of view a reverse mortgage is ‘safer’ than a traditional mortgage. Under a traditional mortgage, you could lose your home for not paying your monthly mortgage payments. Since no such payments exist for a reverse mortgage, there is no such risk.

8. if i sell my house, can i re-apply for another reverse mortgage on my new property?

Absolutely! As long as the property is your primary residence – but just remember that you would need to qualify for enough to pay any mortgage on the new property. Reverse mortgages can be used for purchases in this way.

If you have any questions, please contact your local Dominion Lending Centres mortgage expert.

 

 

Published by DLC Marketing Team

How to Stage Your Home

Lifestyle Trina Kieswetter 30 Mar

Are you finding that your current home is no longer meeting your needs and are looking to upsize, downsize or simply relocate? We have some tips for you on staging your home so you can get the best results (and the best offer!):

  1. Utilize Mirrors: Mirrors can really help to open up a space to make it seem much larger and brighter, which are two aspects that really appeal to most buyers.
  2. Pare Down Your Furniture: Depending on your space and room design, it can be a good idea to pair down furniture (such as extra chairs in a living room) to help open up the space more and allow the buyer to see its potential – without it being bare!
  3. Bring on the Hotel Vibe: When staging your bedroom and bathroom, think HOTEL aesthetic; clean white sheets, a single fluffed pillow, white towels for a clean and welcoming look.
  4. Declutter Your Spaces: While clutter makes your home feel you and feel lived in, for potential buyers it distracts from the room and makes the home feel like there is less space.
  5. Remove Personal Items: It is important to remember that buyers in your home are looking at it to become THEIR home. Removing any personal photographs and other items will help give them a sense of the space and ability to picture their own life there without distractions.

By doing these five things, you can help your home standout on the market and make the best first impression possible!

Looking for mortgage advice before you sell? Want to ensure your new home has the best rate? Reach out to a Dominion Lending Centres mortgage expert today to discuss your goals and current situation!

 

 

Published by DLC Marketing Team

So, You Want To Be A Landlord?

Real Estate Trina Kieswetter 18 Nov

Are you dreaming about owning a rental property and making some extra income each month? Before diving into becoming a landlord, there are some things you should know from the advantages and disadvantages to some tips when it comes to buying a rental property.

Advantages of Owning a Rental Property

If you’re looking to purchase a property for rental and become a landlord, you are likely already aware of some of these advantages, but just in case, some benefits to this include:

  • Earning additional regularly monthly income
  • Allows you to continue to build home equity in the property(s) that you rent
  • Ability to deduct certain items from your gross rental income such as mortgage interest, property taxes, insurance, maintenance costs, property management fees and utilities.

Disadvantages of Owning a Rental Property

As with any investment, there are also some disadvantages to owning a rental property, which are important to consider before you make the leap. These can include:

  • Responsibility of maintaining the rental property and managing your tenant(s)
  • Rental income is taxable and must be included on your income tax. Depending on the value of the extra income, it may push you into a higher tax bracket.
  • Unexpected expenses and issues may crop up over time. It is ideal to budget 2% of the purchase price of your property for potential repairs. You’ll also want to keep some money aside should your tenant leave and you need to cover a few months to find a new tenant.
  • If you choose to sell the rental property in the future, it will be subject to capital gains tax.

What to Know BEFORE You Buy

Before getting started, it is important to calculate the cost of your investment (purchase price and closing costs), as well as consider maintenance amounts (approximately 1% of the property value for the year) and compare to current rental prices to be sure it is a profitable investment before purchasing. In addition, note the following:

  • The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else. Another option is to utilize existing equity in your primary residence and refinance for the cash to purchase your rental or investment property. Be sure to factor in funds for closing costs, potential repairs and maintenance in your amount.
  • Only a portion of the rental income can be used to qualify and determine how much you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income and subtract your expenses.
  • Interest rates usually have a premium when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.

Final Tips on Becoming a Landlord

If you’ve decided to move forward with getting a rental property and becoming a landlord, here are some tips to consider:

  • Don’t forget about insurance! Ensure you have proper coverage for a rental situation and to cover any unforeseen events.
  • Educate yourself on what it means to be a landlord in your province from tenant laws to rental responsibilities.
  • Do your research on rental rates and locations before you choose to buy so that you are aware of where the market is at when it comes to potential earning power.
  • Choose the right mortgage for your rental property. Your mortgage broker can help you with this!
  • If you’re looking to run multiple rental properties, consider hiring a property manager who can be a go-between with you and the tenants.

With the right purchase price and rental costs per month, a rental property can be a great way to supplement income. If you’re looking to purchase an investment property, be sure to reach out to a Dominion Lending Centres mortgage expert to discuss your options and understand what is required.

 

 

Published by DLC Marketing Team

Selling Your Home in Winter

Real Estate Trina Kieswetter 5 Oct

While you might think selling your home in winter is harder, with the right considerations it doesn’t have to be! When selling your home during warmer months, the focus is typically on curb appeal and gardening, as well as having bright colors and patterns to draw out different rooms.

While curb appeal should not be forgotten in winter months, the focus should be centered on creating a warm, comfortable and welcoming space. You can do this through the following:

  1. Curb Appeal – If you live in an area that receives high amounts of snow, be diligent about keeping your sidewalk and driveways clear for visitors, and to keep your home looking clean for viewing. Always make sure to sweep any fallen leaves or debris.
  2. Keep it Cozy – Ensuring your home is sufficiently heated during showings will also go a long way to making it feel more comfortable; a steady 20 to 22 degrees Celsius during showings is ideal.
  3. Light and Inviting – With days being shorter and darker during winter, ensuring your home is light and inviting can make a big difference. In some cases, you may consider repainting the walls before listing your property.
  4. Declutter – When selling, it is important to declutter your home so that it looks its best and gives room for people to imagine their own belongings in your space.
  5. Define Property Boundaries – If you are showing your home in the middle of snow season, be sure to mark the four corners of your property so that potential buyers can see exactly what they are getting.

While there is some extra work with selling your home in the winter due to the weather conditions, it can pay off! Buyers tend to be highly motivated and often there is less competition for sales during this time giving more focus to your home.

 

 

 

 

Published by DLC Marketing Team