Canadian Reverse Mortgages vs American
When it comes to understanding reverse mortgages, it can get confusing due to the influence of American media and news here in Canada. Terms like HUD, HECM, AARP, FHA, and churning are specific to the US reverse mortgage and do not apply to the Canadian reverse mortgage.
While both Canada and the US have reverse mortgage products, they operate VERY differently and have distinct rules and laws. Here are some key differences:
- Eligibility: In the US, at least one spouse must be over 62 years old to qualify, whereas in Canada, both applicants must be 55 or older.
- Qualification: In the US, only one spouse needs to qualify, but in Canada, both spouses must qualify. This difference has caused issues in the US when a younger spouse is left behind after the death of the older spouse, potentially leading to foreclosure. This situation does not occur in Canada since both applicants must be over 55.
- Legal Advice: In Canada, applicants must obtain independent legal advice before approval, while this is not required in the US. – Red Flag if you ask me!
There are also differences in closing costs and ongoing fees between the two countries. US reverse mortgages tend to have higher closing costs and additional servicing fees.
In terms of lending standards, Canadian banks are generally more conservative and less likely to approve a reverse mortgage if they perceive a higher risk of not recovering their money. This conservative approach provides borrowers with more confidence in the financial stability of the product.
Similarities between Canada and the US include the maximum amount that can be borrowed (up to 55% of the home’s equity) and the absence of monthly payments.
In summary, while the objective of reverse mortgages in both countries is to give seniors access to their home equity during retirement, the Canadian system offers more borrower protection and avoids cases of foreclosure that occurred in the US before 2014.
If you are considering a reverse mortgage in Canada, I can assist you and provide more information on costs, fees, and alternatives.