5 Minutes
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September 25, 2024
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Hasan Nizami
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You’ve built up a lot of equity over the years you’ve owned your condo. In fact, for most 55+ Canadians, property accounts for a huge part of their net worth.
Imagine if you could release that equity straight into your checking account. You could renovate, give gifts to family, travel the world, or do anything else you can think of!
A reverse mortgage makes that possible and is one of the best ways to fund retirement and later life. Condos are a unique challenge, but we explain how you solve it in this article.
A reverse mortgage is a loan of up to 55% of your home’s value. You can unlock the equity you’ve built up in your home without needing to sell or move.
Reverse mortgages are available to Canadians over 55 and can be used to fund retirement plans, start gifting inheritance early or even to pay off debts.
You can find more information in our article explaining reverse mortgages.
A reverse mortgage gives you a tax-free cash payment for up to 55% of the value of your home, without sacrificing home ownership.
You don’t make monthly repayments. The interest you’re charged is just added to the balance of your loan and you only repay when you (and your spouse, if you own together) no longer live there.
For a more detailed explanation, we’ve written an article about how reverse mortgages work in Canada – with real world examples.
Yes, condos are eligible for reverse mortgages. There are a few caveats, but, in most cases, you can get a reverse mortgage on your condo. You can use the cash to fund your retirement, work on renovations or do whatever you like.
To be eligible for a reverse mortgage, you’ll need to meet a few requirements.
As well as the general property requirements for reverse mortgages, condos have a couple of extras you need to know about.
Before going ahead with a reverse mortgage application, get clear on these five key questions.
This is the make-or-break issue with condos: condominium corporations set laws and rules for the properties in your complex.
The corporation represents the interests of all residents and units. You probably pay a regular management or condo fee already – this is to the corporation, so they can manage the upkeep of all the shared spaces like gardens or stairwells.
Your corporation might forbid reverse mortgages – often because they worry about owners defaulting on their loan.
You’ll need to ask your corporation whether they allow reverse mortgages. If they don’t, you’ll have to either petition for a change of rules or explore other options.
A reverse mortgage isn’t the only option for funding your retirement (or other) plans. It’s definitely a good one, but it’s not going to be the right choice for everyone. There are other loans available, as well as selling assets outright. It all depends on your situation.
So, if you want to make the right choice about your finances, you’ll need to take stock. Get a pen and paper (and probably a big pot of coffee), sit down and crunch the numbers. Try to work out:
With that clarified, you’ll be able to assess which option suits you best.
Borrowing money comes with costs, but they can vary quite a lot from loan to loan. TYou only repay a reverse mortgage at the end of the loan, unlike most other loans with monthly repayments.
You need to be aware of the setup costs for your reverse mortgage, though. At Bloom, we charge a processing fee, appraisal fee and ILA Certificate fee – totalling $2,300.
We take these costs out of your loan. If you borrow $500,000, you’d receive $497,700 (minus any amounts that would be paid to any existing lenders). Make sure you account for this difference, in case you need every penny of your loan.
Working with a financial advisor or broker will also add to your costs.
You should carefully consider any financial agreement you enter and be sure you know what you’re agreeing to. It’s a legally binding contract and you have to know you can meet the obligations it sets out.
The main obligations to be aware of with a reverse mortgage are that you have to:
Borrowing a large sum of money shouldn’t be taken lightly. The support of a specialist – whether that’s a broker or a financial advisor – should make the process easier and more comfortable for you.
Working with a specialist will add to your costs, so you’ll need to account for that in your budgeting and planning.
Bloom offers one of the best options for 55+ Canadians looking to fund their retirement and later life.
Our reverse mortgages unlock the equity you’ve built up in your condo, without the risks and regular repayments of a Home Equity Line of Credit (HELOC) or sacrificing your equity with a fractional equity arrangement.
Head here to learn more about reverse mortgages and how they compare to other options.
While reverse mortgages are growing in popularity, they’re still not widely understood. We’ve answered the most common questions we hear below, to save you searching for them.
You only repay your reverse mortgage when you (or the last remaining owner) vacates the property. That’s usually either from selling your condo or passing away.
You only risk losing your condo if you let the property fall into disrepair or fail to pay the taxes and premiums required by law. You don’t have to worry about affording monthly repayments, as your loan is only due when you leave your home.
As long as you stick to the terms of your reverse mortgage agreement, you can continue living happily in your home
You are protected by the Home Equity Guarantee, which guarantees the amount you repay will always be capped at the fair market value of your condo at the point your loan is due for repayment.
If you borrowed $500,000 but your home is valued at $450,000 when your loan is due for repayment, you will have to repay $450,000.
There are no restrictions on how you use the money from your reverse mortgage. Renovate your home, travel the world, give your family a living inheritance – the choice is all yours!
Condos are a unique challenge, but, if your corporation permits them, a reverse mortgage can be as easy to arrange as any other property.
A quick phone call or email to your condo corporation will give you the answers you need to move forward with a reverse mortgage.
From there, you can start planning for the exciting future in which you unlock the equity you’ve built up. The real challenge is deciding how you’ll spend it!
You can get a no-obligation quote by answering just three questions: get a quote.
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While mortgage payments may seem like the biggest financial stress for Canadian homeowners, they’re struggling to afford daily essentials like groceries.That’s according to new data released today from the Angus Reid Forum, in partnership with Toronto-based mortgage lender Bloom Finance.The survey’s findings indicate that a significant number (42%) of Canadian homeowners say day-to-day essentials like groceries and gas are the main financial struggle they are dealing with, followed by unexpected expenses (20%) and mortgage payments (11%).
Exchanging hard-earned home equity for short-term liquidity requires some thought. That’s especially true with a reverse mortgage, where the equity you cash in could be gone forever. But what happens to that careful contemplation when accessing home equity is as simple as swiping a credit card? That’s the question I’ve had since reverse mortgage provider Bloom Finance Corporation launched the Bloom Prepaid MasterCard in March 2024. It’s an innovative tool, but is having such easy access to home equity the right choice for cash-strapped homeowners? Let’s find out.
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