10.3.7 Getting cash from your home

If you own your home, you can use it to free up some extra cash. Here are three ways:

• Sell it and buy something cheaper, or rent. Then you can invest some or all of the money so it will grow. If you purchase a smaller home, your property taxes and costs for utilities and maintenance may go down. If you rent, you won't have to pay property taxes or repairs.
• Rent out all or part of your home or other property. You can then invest some of the rental income you get.
• Borrow back some of the savings you have in your home. If you have paid off some or all of your mortgage, you may be able to get a reverse mortgage (see below), a bank loan, a regular mortgage or a line of credit.

For more information on getting cash from your home, see the Mortgages module.

Reverse mortgage

A reverse mortgage is a loan that is designed for homeowners 55 years of age and older (if you have a spouse, the age qualification applies to both of you). A reverse mortgage is secured by the equity in the home, which is the portion of the home's value that is debt-free. It allows you to obtain cash without having to sell your home.

Unlike with an ordinary mortgage, you don't have to make any regular or lump-sum payments on a reverse mortgage. Instead, the interest on your reverse mortgage accumulates, and your equity in the home decreases over time by the amount of the loan, plus the interest. If you sell your house or die (with no spousal joint owner), or if your home is no longer your principal residence, you must repay the loan and any interest that has accumulated.

The cost of reverse mortgages is higher than for conventional mortgages, and they are subject to many conditions. Investigate the alternatives thoroughly before making any decisions about a reverse mortgage.

To learn more, see the Financial Consumer Agency of Canada’s information on Reverse mortgages, or the reverse mortgages information at the Autorité des marchés financiers website.