What happens to the equity in your home?
By taking out a reverse mortgage, you get to have access to some of the equity in your home now, when you need it, without having to sell or move. Like with a hotel stay, you get to enjoy all the benefits of the extra money now and don’t have to pay for it until you choose to leave.
As with any mortgage, your equity will be the value of your home less the amount of your loan. If you choose not to make any interest payments, the amount you owe will be calculated based on the time you stay in your home and the interest rate of your reverse mortgage.
The chances are that your home will also increase in value (on average, Canadian homes have increased in value by over 5% annually over the last 18 years).
For example, let’s say you take out a reverse mortgage of $200,000 and your home is worth $800,000 (leaving $600,000 in equity). Over five years, if house prices were to increase by just 3% every year, your home’s equity would rise from $600,000 to $650,300.1
Plus, HomeEquity Bank guarantees that you will never owe more than your home is worth when you decide to sell it. In fact, 99% of homeowners have money left over once their loan is repaid.
1 Based on an annual increase in value of 3%, the home’s value would be $927,419 after five years. Based on HomeEquity Bank’s five-year rate of 6.74% (as of Nov. 2018), the loan would be at $277,118 after five years. $927,419 - $277,119 = $650,300 in equity. House prices are not guaranteed to rise every year, however, and could fall in value.