When you’re exploring reverse mortgage solutions, you may be curious if there are any equity requirements. While equity requirements will differ based on the specific loan that you get, there are some general rules that you should be aware of when it comes to reverse mortgages.
Home equity is the difference between the value of your home and how much you owe on your mortgage(s). For example, your homes’ value is $500 000 and you owe $100 000, your home equity would be $400 000.
Here is how much equity you need for a reverse mortgage.
What Percentage Equity Do I Need for a Reverse Mortgage?
There is no official minimum of home equity needed to receive a reverse mortgage loan.
In all cases, the reverse mortgage loan will be used to pay off the mortgage(s) on your home first with any remaining amounts available being used towards whatever you may require. For example; home renovations or healthcare costs.
A reverse mortgage loan offers up to 59% of the value of your home, with your Loan to Value (LTV) being related to your age.
How Do I Qualify for a Reverse Mortgage?
There are three main things that will determine if you qualify for a reverse mortgage: the value of your home, your age, and the type of property. Reverse mortgage age qualification is set to a minimum of 55 years. The older you are the more you are able to borrow. The more valuable your home the larger the reverse mortgage you’ll be able to take out. And, certain property types, like single-family dwellings, are more valuable while other property types may not even qualify.
There are also reverse mortgage residency requirements–the home must be your primary residence.
Most applicant(s) will qualify for a reverse mortgage even when a bank has declined you for a traditional loan based on your income. However, having a larger income may help you afford the ongoing maintenance and other responsibilities you’ll have. You will have to keep the home in good order while it is under the loan.
How Much Will I Qualify for?
In Canada, the maximum available loan amount for a reverse mortgage is 59% of your home’s value and is related to your age. Other than this maximum, the amount that you qualify for will depend on the factors listed above.
If you know that you won’t qualify for a reverse mortgage now, you can still reach out to lenders and see what you’d need to qualify in the future. Or, an advisor may be able to point you to other solutions that can help you, like downsizing, or other financial products.
What About You?
Are you still asking, “how much will I qualify for to borrow with a reverse mortgage?”. We can give you the specific, professional advice that you need to make a good decision for your future. Reach out to us at Reverse Mortgage 4U today.