Mary, an 85-year-old widow, had fully paid for her townhouse but only received a limited monthly income unless she took in students each year. She wanted to travel and quit renting her property, so she came to see us. Auxilium secured a reverse mortgage for Mary. She now has $250,000 in cash that supplements her retirement income and gives her the freedom to travel.
Reverse mortgages, sometimes known as CHIP mortgages, are one of the most misunderstood products available to homeowners. In its simplest terms, a reverse mortgage is a regular mortgage without the monthly payments. Instead of making monthly mortgage payments, your payments are added to the outstanding balance you originally borrowed.
How does a reverse mortgage benefit you?
Consider the following:
- The minimum age to qualify for this product is 55 years old.
- The maximum loan to value (LTV) - the highest percent of the value of your home you can borrow - is 55%. For example, if your home's current value is $600,000 you could be eligible to borrow up to $330,000.
- The lender states, "99% of the time a homeowner or their heirs has money (equity) left over when their reverse mortgage loan is repaid."
- In the case where a home is owned by a couple, if one spouse should pass the mortgage carries on with no need to re-qualify.
- The mortgage is only repayable if you sell or move out of the home.
The amount you can borrow is based on location, your age, and the value and condition of your home. Your income only needs to cover the annual taxes and condo or strata fees, if there are any.
Steve and Barb owned their home outright but had very little monthly income. They wanted to downsize on their own terms, so they put in an offer on another home. They were able to secure their new home with a 50% equity reverse mortgage and a private short term mortgage on their existing home until it sold. This arrangement allowed them to control the terms of their move and when it would happen.
How much will a reverse mortgage cost you?
There are no fees to apply for a reverse mortgage through Auxilium. Closing costs, standard in most mortgage products, do apply. A typical arrangement includes:
- An appraisal fee of $300 to $400 in most areas.
- Independent legal advice is mandatory and can vary from lawyer to lawyer.
- An administration fee paid to the lender of $1,795 depending on the mortgage term. This fee is deducted from the mortgage proceeds by the lender at closing.
There are many situations in which a reverse mortgage could be right for you. If Mary, Steve and Barb’s stories sound familiar contact the Auxilium Team to speak with one of our mortgage specialists. Call Toll-Free 1-855-590-6520 or visit us at 307 Goldstream Avenue during regular business hours. We can also arrange an appointment evenings or weekends to work with you.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.
This post reflects the best available information at the time of writing/last update. In order to ensure that you have the most up-to-date information, contact us to confirm the details for your specific situation.
Originally posted September 2016
Updated January 2020