Information About Reverse Mortgage Loans for Canadians

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In Canada, reverse mortgages are loans that provide a safe and easy way to access the funds that are currently locked into your mortgage. There are several similarities and differences between regular Canadian mortgages and a reverse home equity loan. You can apply for one through a Canadian mortgage company, as you would with a regular mortgage. However there are more restrictions for qualifying for one in Canada than with a regular mortgage. The payment flow is another difference between these two types of mortgages. In Canada, unlike a regular mortgage the lender pays you, rather than you paying the lender.

In order to qualify for such a specialized mortgage you must meet certain criteria. You have to be a Canadian homeowner. You can only qualify if you are over 55 years of age. A key financial qualification has to do with your current mortgage, which must be less than 40% of your home's total value. Of course, just like with a regular mortgage, qualifying isn't everything. Just because you qualify for a reverse mortgage won't mean that it is the right choice for you. Carefully weigh the pros and cons to see if it's a good financial decision for you and your family.

There are a number of benefits to these types of mortgages. Canada does not tax the cash you receive. This means that you can turn part of your home's value into tax-free cash. Another benefit is that you can choose the type of payment you will receive. Whether you prefer a monthly payment, credit or a lump sum, this tax-free money is yours to do with as you please. You don't need to make payments until you sell your home, as long as you and your spouse live there. The main benefit is the financial freedom that you are provided. This could be the freedom to retire early, travel, do home improvements or make a large purchase. The decision is yours.

As with any financial decision there are restrictions that may or may not work for you. It's important to understand all the ins and outs. In Canada, reverse mortgage interest rates tend to be higher than a line of credit because you have the option of never making an interest payment until you sell your home. There are set up fees involved too. Although these fees will vary depending on the broker you deal with you will want to include them in your plan as they will factor into your decision.

There are a number of different people you should consult when considering a specialized mortgage. Talk to your financial advisor as well as a mortgage specialist. You should also consider discussing the decision with a legal specialist to ensure that you understand all the intricacies of the arrangement before you sign anything. This would be no different than the process you took when you contacted a real estate lawyer before you bought your house and signed your initial mortgage. You also want to discuss the decision with your family and make sure that everyone is clear and on the same page. Only when you have a clear understanding of the benefits and disadvantages of reverse mortgages will you be able to truly make a good decision about whether it is the right financial move for you.

ReverseYourMortgage (a division of Mortgage Edge) are Canadian Reverse Mortgage experts and have specific experience helping retirees make important financial decisions.

ReverseYourMortgage only recommends safe and secure products like the Canadian Reverse Mortgage and their client's interests are always their primary concern.

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Retirement Savings in Drawdown? Think About Equity Release

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So many people are struggling with this prolonged recession. Listening to the news, it doesn't look to be getting any better any time soon. Meanwhile, those who recently retired thinking they had a large enough nest egg or pension to support them, have watched the markets slash the value of their investments and pensions, while interest rates keep savings accounts providing little or no value at all. Some people just need a bit of extra help financially, for themselves or others in their family. These people should seriously consider home equity release schemes.

What is equity release?
The basic definition of equity release is simply finding a way of getting money out of an investment. For most people, the most important investment they have is their home, so most plans are mortgages on property assets called lifetime mortgages. These are not a standard mortgage, the kind that has just been paid off once retirement has been reached. Rather they are a specialist lifetime mortgage that has specific features for the people over 55 years of age that they are restricted to.

A lifetime mortgage is principally the same as re-mortgaging your home. However, the financial adviser who helps you set up the equity release plan has a number of potential options to offer any prospective applicant. Some people like having their equity release loan paid to them in a single, one-off lump sum - just like a traditional mortgage. Others may require the tax free lump sum to be paid in stages, rather than all at once. A less common request is for the money to be paid as a regular income.

What can the tax-free cash be used for?
This arrangement is excellent for someone looking to enhance their retirement lifestyle by way of renovating their home, build an extension or make a gift to their children. By re-investing funds taken out of your property will have a longer term positive effect on the final value of the property once it is sold. This will be of interest to your children & their inheritance.

Therefore, people looking at a release of equity should not consider lifetime mortgages as a poor choice, as although they are taking cash out, they are upgrading the home & hopefully adding or helping to retain its value.

What are the different options?
There are further options available to any potential applicant when considering equity release schemes. They can now pay the interest on a monthly basis, therefore keeping the size of the equity release loan fixed. This example is a fixed interest only lifetime mortgage, and a great way of keeping the size of debt under control.

These plans have been given much thought as there is also the flexibility to select how much of the interest you wish to pay. Therefore, you can work within your own budget.

Another option for those looking to supplement their savings or pensions is the ability to release the equity release funds slowly; with the tax free cash being withdrawn in smaller increments as a wage would. This means that an additional amount of funds can be made available on a monthly basis, making it easy to supplement pensions or savings and not have to return to work or sell the home entirely.

If you prefer flexibility of when & how much you withdraw then a drawdown equity release plan can be considered. After taking an initial tranche of cash from a facility created by the loan provider, you then can draw ad-hoc payments from thus reserve whenever required. Therefore, if a new car, boiler or holiday requires payment the funds are accessible within a 1-2 week window.

In both of these examples, the value of the home equity release loan can be repaid if the home is sold; either if downsizing, or if the policy holders move into care. Alternatively, when the inheritance estate is dispersed, the equity release loan will be a part of the liability on the value of the house.

How is ta lime mortgage repaid?
Once the residence is sold, then the equity release plan is repaid. Alternatively, if a member of the family wishes to retain ownership of the property, maybe for letting or investment purposes, they will pay back the equity release loan - possibly through a residential or buy-to-let mortgage arrangement.

However, what is important is that there are options for those struggling financially in their retirement, when sitting on a large family home. Often people feel that financing the home might be shifting a debt to the next generation, but it is associated with a property asset - and therefore passes on the option of keeping the family home, or selling it at a later time. Hopefully, once property values do start to rise it may have better market values than during the current recession.

In summary, the options that lifetime mortgages present can be very helpful to those who need some extra money. They can be helpful in their timeliness, they are available and can be completed in a relatively short period of time (compared to that of selling a home). They include features which are likely to be agreeable and attractive to the over 55's who are looking for this support as well.

Mark Greggs is the founder of Equity Release Supermarket who were recently accredited 'Best Financial Advisers' at the Equity Release Awards 2008.
Mark is an experienced Independent Financial Adviser who has now been providing quality equity release advice for the past 12 years.
Gained with this experience is exclusivity to deals with some of the UK's leading financial providers.
Mark aims to pass on his experience in assisting the over 55's decide whether equity release is the right choice for them.
For further information or to compare equity release deals available go to: -

http://www.equityreleasesupermarket.co.uk/

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