Some people are under the misunderstanding that in order to get a reverse mortgage all they need is to own a home, regardless of how much is still owed on the existing mortgage.
They think of this loan as a typical conventional refinance transaction where the loan amount can be very close to the value of the home. However, this is not the case with a this type of mortgage. Equity is the key component in determining a borrower's eligibility for a reverse mortgage.
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To be eligible, there must be significant equity in the property. Minimally, the amount of equity should be in the area of 50 to 60% of the market value, depending on the ages of the homeowners and the current interest rates. The reason the equity requirement is so high is because the equity must last the expected life-time of the youngest borrower.
All owners on the title to the home must be at least 62 years old There should be a large amount of equity in the home The home must be the primary residence for all borrowers The home must be: Single Family, Condo, Town-home, 2-4 owner occupied home or manufactured on a permanent foundation and built after June of 1976. Criteria that are NOT considered are:
Although, not right for everyone, this mortgage can be the perfect answer for seniors who wish to remain in their home but are finding it a challenge to make their monthly payments and meet other financial obligations.