What is a reversed mortgage?
A reverse mortgage as per Wikipedia is a home loan that provides cash payments based on home equity. Homeowners normally “defer payment of the loan until they die, sell, or move out of the home. Upon the death of homeowners, their heirs either give up ownership to the home or must refinance the home to purchase the title from the reverse mortgage company. Specific rules for reverse mortgage transactions vary depending on the laws of the jurisdiction.
In a conventional mortgage, the homeowner makes a monthly payment to the lender. After each payment, the homeowner’s equity increases by the amount of the principal included in the payment. In a reverse mortgage, a homeowner is not required to make monthly payments. If payments are not made, interest is added to the loan’s balance. Although the “rising loan balance can eventually grow to exceed the value of the home,” “the borrower (or the borrower’s estate) is generally not required to repay any additional loan balance in excess of the value of the home.”In Canada the loan balance cannot exceed the fair market value of the home by law.
You can read more about ‘Canadian Home Income Plan’ below:
- CHIP Home Income Plan – Video
- Canadian Home Income Plan is now HomEquity Bank
- Q & A CHIP Home Income Plan
If you like to have more information on reversed mortgage, kindly contact me (Elsie Tse) at 604-716-3369 or Email Me.