So, They’re Turning To Reverse Mortgages

Nine out of ten Canadians want to continue living in their home during their retirement years. Reverse mortgages are helping them achieve that.

A recent survey by a reverse mortgage provider, the HomeEquityBank, found that 95% of Canadians aged 45 or more said living in their homes would help them maintain their independence, comfort and dignity as they age.

This is pretty much unchanged from 2020 when a similar survey was conducted by the National Institute of Ageing. The survey found that more than nine out of ten Canadians plan to support themselves for as long as possible.

In the meantime, reverse mortgage debt held by seniors reached a new record of $5.4 billion as of February. That’s an increase of over 18%, or $829 million, over the year before, according to data provided by the Office of the Superintendent of Financial Institutions (OSFI).

The Benefits of Reverse Mortgages

Once a homeowner turns 55, it’s generally easier to qualify for a reverse mortgage.

Reverse mortgages allow seniors to supplement their retirement income by tapping into the equity in their homes. They can do that either by way of tax-free lump-sum or monthly payments.

These mortgages are designed in a way that doesn’t let seniors owe more than what their house is worth. That’s because the debt is paid off once the house is either sold, or the homeowner passed away.

Even though reverse mortgages do not require monthly payments, their typically higher interest rates, which currently range between 5% and 7%, can quickly eat away at the proceeds from the sale of the home. The rising prices over the past couple of years, however, have brought substantial improvements to homeowners’ equity.

Due to this growing need for cash, Canada’s two leading reverse mortgage providers have experienced record growth over the past year.