How to Qualify for a Reverse Mortgage

How to qualify for a reverse mortgage in Canada?  It’s much more straightforward than it is in the USA.  Here are the reverse mortgage basics.

Here’s how to qualify for a reverse mortgage in Canada.

It’s virtually the same rules for all of Canada.  That is, everywhere in Canada except in the Yukon Territory.

By the way, Canada’s two reverse mortgages (a CHIP Reverse Mortgage and a Path Home Plan Reverse Mortgage {also called an Equity Release}) are very, very similar mortgage products.

Keep this in mind: the requirements for how to qualify for a reverse mortgage in Canada are different from those in the United States.  So make sure whatever you read (online, or in books) is specifically for Canada.  There is a lot more written about this type of loan in the USA.

The most basic requirement is age.  That means your age and the age of anybody else on title to the home.  You must be at least 55 years old, and so must anybody else who is on title of your home.

But how to qualify for a reverse mortgage if I’m under 55?

You can’t, plain and simple.

The next requirement is that a reverse mortgage has to be a FIRST mortgage.  Many people don’t know what the difference is between a first or second or third mortgage.  It’s really simple.

A first mortgage is the debt registered against your property that has FIRST priority if your house is sold.

That debt (a mortgage, for example) will get paid first.  It means if you have any other debts registered (this means “secured” with your home being the collateral for the debt), then those debts will only get paid off AFTER the first mortgage is paid off.

Fortunately, you can use the reverse mortgage funds (also called “proceeds”) to pay off any existing debts registered against your home.

This means you avoid a chicken-and-egg scenario where you want a reverse mortgage but can’t get one because you already have debts registered against your home.

Next requirement is your home location and property type.  If you live in an upscale neighbourhood in a single detached home, then your chances are pretty good.  If you live in the Northwest Territories in a mobile home, then the mortgage lender might not be as willing to give you a reverse mortgage.

Last requirement: the reverse mortgage has to be on a home that is your principal residence.  You can own ten homes but the mortgage has to be on the one that Canada Revenue Agency considers to be your principal residence.

What does principal residence mean? Here’s a link to the Canada Revenue Agency website.  For many people the question of principal residence is a grey area.

If you have several residences, I suggest you read the guidelines on the CRA website.  If you still have doubts, contact us at MortgageMop by clicking this link or call whoever does your annual tax return.

We hope this helps clarify any doubts about reverse mortgages in Canada.  If you have any questions, don’t hesitate to reach out to us for a quick answer!