It is sometimes misconceived that reverse mortgages have higher charges for upfront costs; however, the truth is the CHIP reverse mortgage has the same costs as a regular mortgage in Canada.

Interest Rates

Interest rates of a reverse mortgage are updated on a regular basis. Although they are a bit higher compared to traditional mortgage or line of credit (roughly 2% higher), the CHIP reverse mortgage offers tax-free cash upfront without having to make any regular mortgage payments until the homeowner decides to move or sell their house, which is a feature that no other financial options offer. Other financial options like private lending and credit cards sometimes offer significantly higher interest rates compared to reverse mortgage. On the other hand, some Canadians have trouble when it comes to qualifying for a line of credit by means of financial institutions.

Reverse Mortgage Fees

As with a regular mortgage, a reverse mortgage will include an appraisal fee, administrative fee and legal fee.

Appraisal Fee

The appraisal fee is normally paid to an outside property appraiser and usually ranges from $300-600. On a regular mortgage, lenders can order an appraisal fee on the borrower’s behalf which also ranges from $300-600.

Fee for Independent Legal Advice

Legal fee ranges from $300-700 and is paid to a lawyer of your choice. In a regular mortgage, legal fees must also be paid to a real estate lawyer upon closing the loan which ranges from $500-1000.

Land Transfer Tax

Land transfer tax is based on the percentage of the purchase price of a house. Each province or state has varying land transfer tax and must be paid on closing. To check the different land transfer tax rates, just visit your local government website.

Title Insurance

Many lenders in Canada will require borrower’s title insurance as a means to protect from losses in the event of a property ownership dispute. This can be done through a real estate lawyer and can cost from $100-300.

Home Inspection Cost

Home inspections are conducted for a buyer to make sure that a house doesn’t have any hidden expenses from any underlying problems. For the seller, a home inspection is done to aid in facilitating the sale of his/her house. The average cost of a home inspection is roughly $200-400 depending on how big the house is.

One common misconception of a reverse mortgage is with the fees associated with it. As mentioned above, the additional fees are almost the same as with a regular mortgage. A reverse mortgage is a great financial option for many elderly people that are having troubles with their finances. It is also helpful in supplementing their retirement finances since many elderly homeowners are cash-strapped.

Contact me today or download my Guide To Reverse Mortgages for more information.