How Much Can You
Borrow With a Reverse Mortgage?
By The Spy on September 25, 2019
Two-thirds of adults are saving for retirement, above
and beyond forced-contribution government programs like CPP. That’s the good
news.
The bad news is that 35% of those
approaching retirement (those over 55) have less than $100,000 saved up.
$100k won’t get them far over
their next 25+ years of life expectancy, even if they’re
receiving:
- Old Age Security and the
Guaranteed Income Supplement (which maxes out at $1,515/month combined; the average is much less),
and/or
- Canada Pension Plan (which
maxes out at $1,155/month; again, the average is less)
With debt levels climbing
and inadequate disposable income growth, the number on Canadians
unprepared for retirement seems destined to mount. Fortunately for them,
many are house-rich and—if no better options exist—can fall back on a reverse mortgage. That’s partly why we’re
seeing reverse mortgages grow at 22% a year, over four times faster than mortgages
overall.
Be Aware
of Loan Amounts
One of the first questions people
ask when considering a reverse mortgage is, how much can I get?
As usual with mortgage questions,
there’s no simple answer. The size of a reverse mortgage one qualifies for
depends on multiple variables, such as:
- Your age
- Property value
- Home type
- Location.
But loan amounts also depend on
something else very important: the reverse mortgage provider you choose.
The
Duopolists
Canada has two reverse mortgage
lenders that dominate the market: HomeEquity
Bank and Equitable Bank.
Other than a few exceptions, the
two have roughly similar rates, fees and policies, but one area where they
significantly differ is with loan amounts. HomeEquity, creator of the CHIP
reverse mortgage, lends much more than Equitable.
Here’s a table that shows
approximately how much someone can expect to qualify for with each lender,
holding the borrower’s age, property type and location constant. It’s based on
the following specific assumptions, as input into each lender’s online calculator.
Your mileage will vary;
