Reverse Mortgages in Ontario

A reverse mortgage allows an eligible homeowner to borrow against the equity in their home without selling the property. Reverse mortgages are generally available to homeowners aged 55 or older, subject to the lender’s eligibility requirements.

Unlike a conventional mortgage, regular principal and interest payments are generally not required while the borrower continues to meet the mortgage conditions. Instead, interest is added to the mortgage balance, causing the amount owing to increase over time.

Nobari Law Professional Corporation provides independent legal advice and legal assistance for reverse mortgage transactions in Ontario.

A reverse mortgage is a loan secured against a homeowner’s principal residence.

The amount available may depend on factors such as:

• the age of the homeowner and any other registered owners; 
• the type and location of the property; 
• the property’s appraised value; 
• the existing financing registered against the property; and 
• the lender’s requirements. 

The homeowner continues to own the property, but the reverse mortgage is registered against title as security for the money advanced.

Depending on the lender and mortgage product, funds may be provided:

• as a single lump-sum payment; 
• as an initial payment followed by additional advances; 
• through regularly scheduled payments; or 
• through a combination of these options. 

The method selected can affect the amount of interest charged. Interest generally begins accumulating when funds are advanced. 

A reverse mortgage generally becomes repayable when an event identified in the mortgage documents occurs.

This may include:

• the property being sold; 
• the borrower moving to another principal residence; 
• the last surviving borrower dying; 
• the borrower permanently leaving the property; or 
• a default under the mortgage terms. 

The repayment requirements and deadlines depend on the lender and the mortgage documents. 

A borrower or their estate may have a limited period in which to repay the mortgage after one of these events occurs. 

Regular mortgage payments are generally not required, but interest continues to accumulate.

Interest may be added to the outstanding balance, meaning that future interest is calculated on a progressively larger amount. As a result:

• the mortgage balance may increase over time; 
• the homeowner’s remaining equity may decrease; 
• less money may be available when the property is sold; and 
• the value remaining for the borrower’s estate or beneficiaries may be reduced. 

Before proceeding, borrowers should understand how the balance may change over the expected duration of the reverse mortgage.

Costs may include:

• interest; 
• appraisal fees; 
• lender administration or setup fees; 
• legal fees and disbursements; 
• title-insurance costs; 
• registration expenses; 
• prepayment charges; and 
• discharge or closing costs. 

Some costs may be deducted from the mortgage advance or added to the mortgage balance. The borrower should review the amount that will actually be received after all applicable deductions. 

The reverse mortgage lender may require existing mortgages, secured lines of credit, or other registered debts to be paid and discharged.

Part of the reverse mortgage advance may therefore be used to pay:

• an existing mortgage; 
• a home equity line of credit; 
• property-tax arrears; 
• condominium arrears; 
• secured debts; or 
• other amounts required by the lender. 

The amount remaining for the borrower may be lower than the approved reverse mortgage amount after required payouts and closing costs are deducted.

Independent legal advice is an important part of the reverse mortgage process.

Ontario’s mortgage-brokerage regulation provides that a brokerage cannot arrange or enter into a reverse mortgage unless it receives a written statement signed by a lawyer confirming that the borrower received independent legal advice about the proposed mortgage.

Independent legal advice allows the borrower to meet privately with a lawyer who is not representing the lender. The lawyer explains the legal nature and consequences of the transaction so that the borrower can make an informed decision.

Independent legal advice is a limited legal retainer and is different from full legal representation for the entire mortgage transaction. The precise scope of the lawyer’s services should be confirmed at the beginning of the retainer. 

Depending on the mortgage documents and scope of the retainer, the lawyer may explain the amount being advanced, interest and costs, repayment events, borrower obligations, default provisions, the lender’s remedies, and the possible effect on the homeowner’s equity and estate.

The lawyer may also review the required documents, witness signatures, and provide the applicable written confirmation of independent legal advice.

Although regular mortgage payments may not be required, the borrower must continue to comply with the mortgage terms.

Depending on the lender’s requirements, the borrower may need to:

• continue occupying the property as their principal residence; 
• maintain adequate property insurance; 
• pay property taxes; 
• pay condominium fees, where applicable; 
• keep the property in reasonable repair; 
• provide information requested by the lender; and 
• comply with the other conditions of the mortgage. 

Failing to comply with a material condition may result in default and could cause the mortgage to become repayable. 

A borrower may be permitted to repay part or all of a reverse mortgage before it would otherwise become due. However, lender-specific prepayment limits, restrictions, charges, or penalties may apply.

The applicable rights and costs are determined by the mortgage documents and lender requirements.

A reverse mortgage may affect the equity remaining in the property and the value available to the borrower’s estate.

Borrowers may wish to consider:

• whether the property is intended to be left to a beneficiary; 
• how the mortgage will be repaid following death; 
• whether the estate will have sufficient funds to repay the debt; 
• whether the property may need to be sold; 
• the lender’s repayment deadline; and 
• whether the estate plan should be reviewed. 

The lawyer’s role does not include valuing the property, predicting its future value, or estimating how much equity may remain in the future.

The lawyer explains the legal terms and consequences of the proposed reverse mortgage but does not determine mortgage qualification, select a mortgage product, value the property, or provide financial, tax, or accounting advice.

Borrowers should obtain advice from the appropriate lender, licensed mortgage professional, appraiser, accountant, or financial advisor and may wish to compare other available financing or housing options.

A borrower may be asked to provide:

• the property address; 
• the reverse mortgage commitment and legal documents; 
• information about the lender or mortgage professional; 
• a recent property-tax bill; 
• existing mortgage or secured line-of-credit statements; 
• condominium information, where applicable; 
• property-insurance information; 
• marital-status information; and 
• information about any other registered owners or persons with an interest in the property. 

Additional documents may be required depending on the lender, property, ownership, and transaction.

Do not send original documents, identification, complete account numbers, passwords, or other sensitive information unless requested by Nobari Law Professional Corporation. If requested, please use the document-sending method confirmed by the firm.

Nobari Law Professional Corporation provides legal assistance with reverse mortgage transactions in Ontario.

Depending on the circumstances and scope of the retainer, our services may include:

• providing independent legal advice concerning the proposed reverse mortgage; 
• reviewing the mortgage commitment and related legal documents; 
• reviewing relevant provisions concerning the borrower’s rights and obligations, repayment, default, and the lender’s rights, where applicable;
• reviewing the amounts advanced and deducted from the mortgage proceeds; 
• obtaining the borrower’s signatures; 
• preparing the required confirmation of independent legal advice; 
• completing applicable mortgage and closing documents; 
• coordinating with the lender or mortgage professional; and 
• reporting to the client after completion. 

The services available will depend on the lender’s instructions, the mortgage documents, the property, and the circumstances of the transaction.

Independent legal advice helps borrowers understand the legal obligations, costs, repayment requirements, and potential consequences of a reverse mortgage before completing the transaction.

Contact Nobari Law Professional Corporation to discuss independent legal advice or legal assistance for a reverse mortgage in Ontario.