Reverse Mortgages Flashcards
What is a reverse mortgage?
A mortgage in which an individual uses the equity of his home as collateral for a loan that becomes due upon death or the sale of the home. Can be a lump sum or annuity payment.
Does a reverse mortgage affect OAS and GIS?
No
Who can access a reverse mortgage?
Individuals age 55 and older.
What is the range of appraised value they can have access to?
10-50%
The older the individual, the higher the % of appraised value he can access.
What are the types of reverse mortgage?
- Reverse annuity mortgage
- Line of credit reverse mortgage
- Fixed term reverse mortgage
What is a reverse annuity mortgage?
A mortgage in which homeowner borrows the equity in the home and uses it to purchase a life annuity.
Even if the home is later sold or the debt paid, the life annuity continues for the homeowner’s life.
Debt is only due when homeowner dies or sells the home.
What is a line of credit reverse mortgage?
A mortgage in which the homeowner uses equity in home as collateral for a line of credit from which funds can be borrowed at any time up to a pre-set annual maximum.
Interest accumulates only on the amount withdrawn.
Valuable for people who have sporadic income requirements as it makes funds available as needed with interest accumulating only when funds are withdrawn.
What is a fixed term reverse mortgage?
A mortgage to provide funds to the homeowner for a fixed period of time often 5 - 10 years.
Repayment of the borrowed funds and accumulated interest occurs at the end of the fixed term.
Valuable for those people who have the need for a specific amount of money for a short or specific period of time.
Ideal for those who are supplementing income before an investment matures or a pension begins.
Is the income generated from a reverse mortgage annuity taxable?
No
Are simple reverse mortgage payments and lines of credit taxable?
No
