If you have been thinking about getting a reverse mortgage, but have been deterred by potential costs, think again! It is a common misconception that reverse mortgages have high upfront costs, but in reality a reverse mortgage can be as affordable as a regular mortgage in Canada. Read on to find out what the costs are as explained by mortgage broker in Brampton, Rakhi Madan.
One of the first costs that may come to your mind is the interest rate. Reverse mortgage interest rates are comparable to other home equity loans, but are usually around 2% higher than the interest rates of a regular mortgage or line of credit. In exchange for a higher interest rate, the homeowner gets tax-free upfront cash and no need for monthly payments until the homeowner moves or sells the home. This is an amazing deal for many homeowners, and is unique to a reverse mortgage.
Next, there are a few fees that come along with a reverse mortgage, but they are very similar to the fees you would find with any other mortgage product. These fees include an appraisal fee of approximately $300-$600, legal fees ranging from $300-$700, and an administrative fee of around $1495 to cover closing costs. The administrative fee is often financed using the reverse mortgage funds.
Two other costs included in the reverse mortgage are the Land Transfer Tax and Title Insurance. The Land Transfer Tax is payable upon closing, and is usually calculated as a percentage of the home’s value. This tax varies by province (and sometimes city) so be sure to take a look at your area’s tax percentages. Title Insurance is also required by most lenders in order to protect against property ownership disputes. This will cost you between $100-$300 if purchased from most real estate lawyers.
Finally, take into account the cost of a home inspection. Home inspections are very common practice during the buying/selling process and cost anywhere from $200-$400.
The CHIP Reverse mortgage is a product that works for many Canadian homeowners aged 55 or over, and the low upfront costs help to further the financial benefits of the product. By helping you unlocking the equity in your home, you can enjoy retirement to the fullest or save up for unexpected costs. Contact Rakhi Madan today to learn more about reverse mortgage products!