Equitable Bank Reverse Mortgage
Equitable Bank Reverse Mortgage Rates
- Homeowners must be at least 55 years old to qualify for an Equitable Bank Reverse Mortgage.
- Borrowers are not required to make regular mortgage payments. The loan is repaid when the homeowner sells the property or passes away.
- Homeowners retain ownership of their property and can continue living in their home, with the amount owed never increasing to more than the home's value.
- Equitable Bank Reverse Mortgages are only available in cities and large towns in Ontario, Alberta, British Columbia, and Quebec.
How an Equitable Bank Reverse Mortgage Works
An Equitable Bank Reverse Mortgage is designed to provide financial flexibility to homeowners aged 55 and older. To be eligible, you must own your home and have significant equity built up in it. Once approved, you can access up to 55% of your home's appraised value. The funds can be received as a lump sum, regular payments, or a combination of both.
Importantly, you retain ownership of your home, will never owe more than your home is worth no matter how long you live for, and are not required to make regular mortgage payments. The reverse mortgage loan is repaid when you sell your home, move out, or pass away.
Founded in 1970, Equitable Bank is Canada's seventh-largest chartered bank, with over $74 billion in assets. Equitable Bank started offering reverse mortgages in 2018 with their Path Home Plan. This later transitioned in 2020 to the current offering of Reverse Mortgage Flex solutions.
Besides reverse mortgages, the federally regulated bank offers a range of financial services, including residential mortgages, investment products, and consumer banking solutions. Along with its fully digital arm, EQ Bank, Equitable Bank is known for its innovative and customer-centric approach to banking, providing Canadians with unique and tailored financial solutions. Equitable Bank is publicly traded on the Toronto Stock Exchange.
Eligibility Criteria
To qualify for an Equitable Bank Reverse Mortgage, there are specific eligibility criteria that homeowners must meet:
- Homeowner(s) must be 55 years or older
- Property must be your primary residence and have an appraised value of at least $250,000
- Home should have significant equity built up
- Property must be maintained in good condition, have property taxes paid, and have homeowner’s insurance
Primarily, applicants of an Equitable Bank Reverse Mortgage must be 55 years of age or older. If you are married or have a common-law partner, they must also be at least 55 years of age. This age requirement is set to ensure the product serves its intended demographic: retirees and older homeowners looking for financial flexibility. Additionally, the property must be your primary residence. This means you must inhabit the home for at least six months of the year.
The home should also have significant equity built up, directly affecting how much money you can access through the reverse mortgage. Generally, you can access up to 55% of your home's appraised value, though the exact amount will depend on factors such as your age and where your home is located. Equitable Bank also requires that the property be maintained in good condition, with property taxes paid and active homeowner’s insurance coverage.
Finally, borrowers must ensure that all existing loans secured against their home, including any outstanding mortgage balances, are paid off either before or during the process of securing a reverse mortgage. This is because Equitable Bank requires their reverse mortgages to be registered as a first mortgage on the property.
Benefits of an Equitable Bank Reverse Mortgage
Financial Flexibility
One of the main benefits of a reverse mortgage is the financial flexibility it offers. You can use the funds for any purpose, whether it's supplementing your retirement income, covering healthcare costs, or making home improvements. This flexibility can significantly enhance your quality of life during retirement.
No Monthly Payments
Unlike traditional mortgages or other loans, a reverse mortgage does not require you to make any monthly payments. Instead, interest is accumulated on the loan and is only repaid when you sell your home, allowing you to enjoy your retirement without the burden of monthly bills. This can be a massive relief for retirees who may be living on a fixed income.
Home Equity Management
A reverse mortgage allows you to tap into your home equity without having to sell your property. This can be particularly beneficial if you wish to stay in your home during retirement instead of downsizing your home. This can also be financially beneficial if home prices continue their rise.
Things to Consider
While an Equitable Bank Reverse Mortgage can provide numerous benefits for retirees, it's important to acknowledge and address any potential criticisms. Some critics argue that the interest rates on reverse mortgages are higher than other forms of borrowing, such as a home equity line of credit (HELOC), making them a more expensive way to borrow money in the long run. Others may argue that leaving a debt against their home goes against the idea of homeownership as a means of building equity.
Some individuals may be concerned about the impact of a reverse mortgage on their heirs' inheritance. While it's true that a reverse mortgage may use up some or even all of the equity in your home, careful planning and discussions with family members can help ensure that your loved ones are still left with a financial legacy. It's also important to note that the non-recourse feature of a reverse mortgage means that if the home's value decreases, or the interest grows the principal to an amount larger than your home’s value, your estate or heirs will not be responsible for covering any shortfall.
Additionally, some critics argue that reverse mortgages may encourage retirees to spend their hard-earned equity too quickly and leave them with limited resources in later years. While this is a valid concern, it can be addressed through careful budgeting and planning with the assistance of financial advisors and family members. Ultimately, it's important to thoroughly research and consider all options before making a decision about a reverse mortgage, as it is a significant financial commitment.
Types of Equitable Bank Reverse Mortgages
Equitable Bank offers three types of reverse mortgages: Flex, Flex PLUS, and Flex Lite. Flex is Equitable Bank’s standard reverse mortgage product. Flex PLUS allows homeowners to borrow a larger percentage of their home’s value in exchange for a higher minimum age requirement. Flex Lite often has a lower interest rate than Flex but Equitable Bank only makes a one-time lump-sum payment rather than recurring scheduled payments.
Reverse Mortgage Flex
The Reverse Mortgage Flex product is designed for homeowners aged 55 and older, allowing them to borrow between 15% and 55% of their home’s value, with a minimum initial advance of $25,000. This product has a minimum appraised home value requirement of $250,000 and includes a no-negative equity guarantee, ensuring that you will never owe more than the fair market value of your home.
Borrowers have several advance options, including initial advances, single/ad-hoc advances (with a $50 fee), and scheduled advances.
Reverse Mortgage Flex PLUS
This product targets older homeowners, setting the minimum age at 70. It allows for maximum borrowing between 44% and 59% of the home’s value, making it a suitable option for those looking to access a higher percentage of their home equity.
Like the Flex product, it requires a minimum home value of $250,000 and guarantees no negative equity. Borrowers can choose from initial advances, single/ad-hoc advances, and scheduled advances.
Reverse Mortgage Flex Lite
Designed for those aged 55 and older, the Reverse Mortgage Flex Lite allows a maximum borrowing between 15% and 40% of the home’s value, making it the most conservative option of the three. Consistent with the other products, it requires a minimum home value of $250,000 and offers a no negative equity guarantee. The main difference is that the only advance option here is an initial lump-sum advance.
Equitable Bank offers reverse mortgage products in cities and most large towns across Ontario, Alberta, British Columbia, and Quebec. This wide lending area makes it accessible to many homeowners across Canada.
Equitable Bank’s main competitor, CHIP Reverse Mortgages, is available in all Canadian provinces.
Equitable Bank Reverse Mortgage Costs and Fees
Set-Up Fee
It costs $995 to set up a reverse mortgage with Equitable Bank, excluding additional costs for home appraisal, Independent Legal Advice (ILA), and legal/closing fees. The set-up fee is only paid once when you initially get a reverse mortgage with Equitable Bank. You won't need to pay another set-up fee when you renew your reverse mortgage for another term, called a reset. The set-up fee is deducted from your initial advance.
Prepayment Penalty
Like regular closed mortgages, Equitable Bank charges a prepayment penalty for paying off your reverse mortgage early or if you make lump-sum payments to your principal larger than the allowed amount each year.
If you exceed your limit, a prepayment penalty is charged. The penalty varies based on the length of time the loan has been active, with a maximum charge of 5 months’ worth of interest in the first year, 4 months in the second year, 3 months in the third year, and followed by 3 months' interest from years 4 to 10. However, after year 11, there is no prepayment charge at all.
After years 6 and onwards, borrowers can choose to pay off their entire balance with just three months' written notice without any penalties.
Equitable Bank allows you to make a lump-sum prepayment of up to 10% of your current principal once every 12 months. You can also prepay your outstanding interest once per month.
Receiving Your Lump-Sum Payment
You can borrow all of your eligible amounts as a lump-sum payment or borrow a partial amount to leave room for scheduled payments. You’ll need to borrow at least $25,000 as your initial advance.
For example, if you are eligible to borrow $75,000, you might decide to receive a $25,000 advance now and schedule payments for the remaining $50,000.
Receiving Scheduled Payments
Recurring advances provide flexibility and can be scheduled at any time for up to 20 years but are only available for an adjustable interest rate term. The minimum advance amounts vary based on your chosen frequency: $500 monthly, $1,500 quarterly, $3,000 semi-annually, or $6,000 annually. It's important to note that these advances are subject to the adjustable interest rate in effect at the time of each advance, but there are no fees for scheduled advances.
Minimum Scheduled Payments
Single advances, on the other hand, are available for both adjustable and fixed interest rate terms. These advances can be paid out anytime after closing with a $50 fee per advance. The minimum advance amount is $5,000.
Minimum Single Advances
How to Use an Equitable Bank Reverse Mortgage
Scenario 1: Covering Expenses
Meet John and Mary, a retired couple who have lived in their family home for over 30 years. With rising healthcare costs and a fixed retirement income, they found it challenging to cover all their expenses. By opting for an Equitable Bank Reverse Mortgage, they accessed a portion of their home equity and used the funds to cover medical bills and home renovations. This financial boost allowed them to enjoy their retirement without financial stress.
Scenario 2: Travelling
Susan, a single retiree, wanted to travel and experience new adventures during her golden years. However, her savings were insufficient to cover her travel plans. By taking advantage of an Equitable Bank Reverse Mortgage, she could finance her dream trips while staying in her beloved home. The reverse mortgage gave her the financial freedom to live her retirement to the fullest.
Scenario 3: Healthcare
Helen, a widow in her early 70s, needed long-term care due to health issues. Although she wanted to remain in her home, the associated costs of in-home care were daunting. By opting for an Equitable Bank Reverse Mortgage, Helen accessed her home equity to fund necessary in-home care services. This financial solution enabled her to maintain her independence and receive quality care, all while continuing to live in the comfort of her own home.
Scenario 4: Business Capital
Mark, a retired engineer, always dreamt of starting a small woodworking business after retirement but was concerned about dipping into his savings to fund the startup. By leveraging an Equitable Bank Reverse Mortgage, Mark obtained the necessary capital to establish his workshop and purchase essential equipment. This newfound financial freedom allowed him to pursue his passion without jeopardizing his financial security, ultimately leading to a satisfying and fulfilling retirement.
Scenario 5: Home Repairs
Emily and James, a couple in their mid-70s, faced significant home maintenance issues that were becoming increasingly difficult to manage on their fixed income. Their roof needed replacing, and their heating system required an upgrade to be more energy-efficient. By utilizing an Equitable Bank Reverse Mortgage, they were able to access funds from their home equity to cover these critical home renovations. This not only improved their living conditions but also increased the value of their property.
Comparing with Traditional Mortgages
No Monthly Payments
Traditional mortgages require regular monthly payments, which can burden retirees on a fixed income. In contrast, the Equitable Bank Reverse Mortgage eliminates the need for monthly payments, providing greater financial flexibility. Instead, interest is accumulated on the loan and is only repaid when you sell your home.
No Qualification Based on Income or Credit Score
Traditional mortgages often have strict income and credit score requirements, making it difficult for retirees to qualify. With a reverse mortgage, there are no minimum income or credit score requirements since the loan is secured by your home's equity. This allows more homeowners to access funds for their retirement needs.
Frequently Asked Questions about the Equitable Bank Reverse Mortgage
What is a reverse mortgage?
A reverse mortgage is a loan that allows homeowners aged 55 and over to access the equity in their home without having to sell or move out.
How much can I borrow with a reverse mortgage?
The amount you can borrow depends on various factors, such as your age and the location of your home. Generally, the older you are and the more valuable your house, the more you can potentially borrow.
Do I have to make monthly payments on my reverse mortgage?
No, there are no required monthly payments for a reverse mortgage. The interest is added to your loan and is only repaid when you sell your home.
What happens if the value of my home decreases?
The reverse mortgage is a non-recourse loan, meaning that the lender can only collect up to the value of your home at the time of repayment. If the value has decreased, you or your estate will not be responsible for covering any shortfall.
Can I still leave my home to my heirs with a reverse mortgage?
Yes, you can still leave your home to your heirs. They can repay the loan and keep the property or sell the property and use the proceeds to pay off the loan.
Can I pay off my reverse mortgage early?
Yes, you can pay off your reverse mortgage early. However, Equitable Bank may charge a prepayment penalty if you pay within 5 years of receiving your reverse mortgage.
Will I still own my home with a reverse mortgage?
Yes, you will still retain ownership and title of your home with a reverse mortgage, just like with a traditional mortgage.
How do I receive the funds from my reverse mortgage?
You can choose to receive your funds as one or multiple lump-sum or regular monthly, quarterly, semi-annual, or annual payments. This provides flexibility in managing your finances and allows you to tailor the payments to suit your needs.
Are there any tax implications with a reverse mortgage?
The funds received from a reverse mortgage are not taxable, as they are considered loan advances rather than income. An Equitable Bank reverse mortgage won’t affect your eligibility for Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits.