I understand why reverse mortgage exists in general, but I can't seem to wrap my head around the fact that Canada does not allow the loan balance to exceed market value of the home. Doesn't this mean that loan companies will lose money?
Hi AnonymousI think you answered your own question. The bank doing the reverse mortgage never wants to be in a negative equity situation as that would not make any business sense as the loan is only needs to be repaid when the home is sold.
The maximum available to a home owner is 55% of the value. The actual amount approved is determined by their age. The older they are, the closer to the 55% they will be approved for.