Meet Sunita and Rahul
Sunita and Rahul are both 55 years old and live in Ottawa with a debt-free home worth $800,000. In this case, they may qualify for a loan of up to 30% of the equity value, meaning they could get a reverse mortgage of $240,000 ($800,000 x 30%).
Their neighbour Mary is a widow and 75 years old. Her home is also worth $800,000, but because of her age, she is likely able to receive the maximum loan-to-value approval of 55%. So, she could borrow a total of $440,000 ($800,000 x 55%).
Repayment requirements
Unlike a conventional mortgage, you don’t need to make regular payments, but you do have the flexibility to make interest-only payments or interest and some of the principal at any time. You must repay the loan when you move out of the home, sell it, or when the last borrower dies.
What about the costs?
A reverse mortgage includes many of the same costs as a traditional mortgage – appraisal, legal and administrative fees. It’s also important to note that interest rates on reverse mortgages are higher than other types of loans.