Marci Deane | Lifestyle.Mortgage Blog

Reverse Mortgages and the Great Wealth Transfer

Fri, 03 Mar 2023 00:39:40 GMT

Recently I was delighted to be a guest on Vancouver’s #1 Real Estate podcast. I had a great time and wanted to share the conversation.

Here's the link to check out the Real Estate Vancouver Podcast.

Episode Summary:

Learn all about reverse mortgages and the great generational wealth transfer happening in Vancouver. Should you get a HELOC or a reverse mortgage? Mortgage broker Marci Deane has the answer!

What is the state of mortgage-free real estate in Metro Vancouver? How does that impact the generational wealth transfer we’ve been seeing in recent years?

Adam & Matt : In 2006, the total value of mortgage-free real estate in Metro Vancouver was $123.8 billion. Half of that was owned by homeowners 55-74 years old. By 2021, that number tripled to $373.3 billion. And the amount owned by 55-74 years old was more than 55%.

The big takeaway: Boomers are real estate rich in Metro Vancouver.

We’ve been watching the generational wealth transfer over the last couple of years. Boomers want to help their kids get into the market. And for most, that help with a down payment is the only way for young adults to get into the market .

One of the ways for people to tap into the wealth in their real estate is through a reverse mortgage, which Marci Deane is going to tell us all about.

Thinking of Investing in a Second Property

Wed, 23 Nov 2022 00:10:41 GMT

If you’ve been thinking about buying a second property and you’re looking to put some of the pieces together, you’ve come to the right place!

Whether you’re looking to buy a vacation property, start a rental portfolio, or help accommodate a family member, there are many reasons to buy a second property (while keeping your existing property), which might make sense for you!

Now, while there are many great reasons to buy a second property, there is also a lot to know as you walk through the process. The key here is to have absolute clarity around your why.

Ask yourself, why do you want to buy a second property? This isn’t a decision to be taken lightly or one that should be made too quickly. Buying a second property should be a strategic decision that allows you to accomplish your goals, and it should include an assessment of your overall financial health.

So with clear goals in mind, the best place to start the process is to have a conversation with an independent mortgage professional. This will allow you to assess your financial situation, outline the costs, and put together a plan to make it happen.

While purchasing a second property is similar to buying a primary residence, there are some key differences. Just because you’ve qualified in the past for your existing mortgage doesn’t mean you’ll qualify to purchase a second property.

One key difference is the amount of downpayment you might be required to come up with. A property that is owner-occupied or occupied by a family member on a rent-free basis will require less of a downpayment than if the second property will be used to generate an income. So, depending on the property's intended use, you might have to come up with as much as 25%-35% down.

This is where strategic planning comes in. Consider unlocking the equity in your existing home to finance the downpayment to purchase your second home. Here are a few ways you can go about doing that:

Securing a new mortgage if you own your property clear title
Refinancing your existing mortgage to access additional funds
Securing a home equity line of credit (HELOC)
Getting a second mortgage behind your existing first mortgage
Securing a reverse mortgage

The conversation about buying a second property should include assessing your overall financial health, leveraging your existing assets to lower your overall cost of borrowing, and figuring out the best way to accomplish your goals.

Negative Equity | What you Should Know

Thu, 20 Oct 2022 00:38:17 GMT

Negative equity occurs when your property is worth less than the outstanding balance on your mortgage. It’s not a very good place to be, especially if you’re planning for your retirement. Another term you might have heard is “being underwater” in your mortgage.

The reality is, most Canadians have a significant amount of equity built up in their homes and this equity can be used to help plan through retirement.

Dealing with a negative equity position is very uncommon, one of the only times the idea of negative equity even comes up is when discussing a reverse mortgage. Usually, the question is asked something like this:

“If my home has depreciated in value at the time it is sold, and the mortgage balance is growing, will I (or my heirs) end up owing more than the house is worth?”

And in the case of a reverse mortgage through the Home Equity Bank, the answer is no. No, assuming you meet all your mortgage obligations, the amount you will pay on your due date will never exceed the fair market value of your home. This is what they call their No Negative Equity Guarantee.

As a reverse mortgage doesn’t have any payments required throughout the life of the mortgage, naturally, the outstanding balance grows with time. But as the Home Equity Bank has more restrictive initial qualifying guidelines than a standard mortgage, even though the balance is growing, it rarely grows beyond the value of the home. And if it does, Home Equity Bank covers the difference.

Compare that with a standard mortgage, where if you wanted to access your home equity, you can potentially refinance up to 80% of the property value, or in the case you're downsizing, you can buy a new property with as little as 5% down. In this case, when the question is asked “is it possible to end up owing more than my property is worth” with a standard mortgage, the answer is yes. If the market takes a turn, you could find yourself in a negative equity position.

Understanding your mortgage options through retirement is crucial to making the best choice for you. Each person’s financial situation is different and there is no one size fits all advice that can be provided on a blog.

As a Lifestyle Mortgage expert, I specialize in helping older Canadians to understand their options, and provide counsel to help them make the best choice. If you have any questions at all, and would like to discuss your financial situation with me, please contact me directly anytime.

Could an Interest Only Mortgage be the right choice for you?

Thu, 22 Sep 2022 19:31:40 GMT

Relatively self-explanatory, an interest-only mortgage is one where your entire mortgage payment goes to interest and does not pay down the principal mortgage amount at all. So at the end of your term, you will owe the same amount as when you got your mortgage.

So you might be asking yourself, what are the advantages? Well, an interest-only mortgage frees up your cash flow. As you’re not responsible for paying down the principal balance, you can expect a lower mortgage payment.

Here’s an example. On a $400k mortgage balance, over 25 years, at a 4% interest rate, the monthly repayment on an amortized mortgage would be roughly $1902/mth. However, as an interest-only mortgage, the payment is $1,321/mth, providing you with an extra $580 in monthly cash flow.

If you’re planning for your retirement and gaining cash flow is essential, an interest-only mortgage might be worth considering.

The money you save by not paying down the principal of your mortgage can be used however you like. It could be used to pay off higher interest debts like credit cards, unsecured line of credits, or any other high-interest loans. Or it could be used to offset the increased cost of maintaining your home through retirement; property taxes certainly aren’t going down anytime soon. It could even be used to maintain your current lifestyle.

Regardless of what you decide to do with the extra cash, the choice is yours.

As the qualifications for an interest-only mortgage require you to have an income, good credit, and home equity, not everyone planning for their retirement; or those who have recently retired, will qualify.

When you compare an interest-only mortgage to a reverse mortgage; where there are no payments required and your balance grows instead of staying the same, an interest-only mortgage could save you money as the rates are typically lower on an interest-only mortgage. However, as there are no required payments on a reverse mortgage, although it is a little more costly, it's the ultimate cash flow option.

As a Lifestyle Mortgage Expert, it is my job to outline the many mortgage options you have as you plan your mortgage through retirement. An interest-only mortgage is just that, one of the many choices you have available to you.

If you would like to discuss all the mortgage options available to you; including an interest-only mortgage, please contact me anytime!

The Truth About Reverse Mortgages

Wed, 20 Jul 2022 23:00:00 GMT

In this article, let’s separate fact from fiction. If you are considering a Reverse Mortgage, it is important you can make an informed and intelligent decision.

Reverse Mortgages have been available in Canada for 25 years, but there are still many myths and misconceptions about them – some understandable and some are not accurate.

What exactly is a Reverse Mortgage?

A Reverse Mortgage is a loan available only to homeowners 55 or older. The amount you can borrow is based upon several factors including your age and the value of your home.

What’s the difference between a Reverse Mortgage and a traditional loan?

You are not required to make any payments on a Reverse Mortgage until you choose to move or sell your home. (However, you can make payments on the loan if you choose to do so.*)

*Prepayment charges may apply.

When you do decide to move or sell, the loan is repaid from the proceeds of the sale of the home. After the loan is repaid, all remaining money belongs to you and your estate.

How much equity (money) will be left in my home after I repay the loan?

On average, homeowners have well over 50% of the value of their home left to enjoy after repaying the loan. This money belongs to you. The exact amount will depend upon several factors, including: the amount of your loan, the value of your home, and the amount of time passed since you took out the loan.

Can I be forced to sell my home and repay the loan?

No. You always maintain complete ownership and control of your home at all times. You can never be forced to sell or move to repay the loan. All you have to do is keep your property in good maintenance, pay your property taxes and property insurance..

What happens if I or my spouse passes away before the loan is paid?

The surviving spouse is under no obligation to make any payments until they move or sell the home.

If you are the sole borrower, and you pass away, the loan is repaid when the estate sells the home. After the loan is repaid, all remaining money belongs to your estate and/or your heirs.

What’s the difference between a Reverse Mortgage and a Home Equity Line of Credit?

With an Equity Line of Credit, you must make regular payments on the loan. With a Reverse Mortgage, you are under no obligation to make payments on the loan until you move or sell. This makes Reverse Mortgages extremely appealing to people on a fixed income who cannot afford to make regular repayments.

Another key difference is that you can be asked to repay your Line Of Credit at any time at the lender’s discretion. With a Reverse Mortgage, you cannot be forced to repay the loan until you decide to move or sell.

What are the interest rates on a Reverse Mortgage?

Interest rates on Reverse Mortgages mirror the rates charged on other home equity loans. They are usually somewhat higher than the rates charged for a Line of Credit because you are not required to make monthly payments or repay the loan until you move or sell your home.

Who offers Reverse Mortgages in Canada?

In Canada, Reverse Mortgages are offered directly to the public by HomEquity Bank, provider of CHIP Reverse Mortgage. The CHIP Reverse Mortgage is also available through all major Canadian banks, as well as credit unions, mortgage brokers and financial planning organizations.

This article is the property of HomEquity Bank and has been published with permission.

Reverse Mortgages in Canada: What’s the story

Wed, 22 Jun 2022 23:00:00 GMT

Unlike our American neighbours, when Canadians explore the option of a reverse mortgage, there is only one provider, HomEquity Bank. In America, there are many companies who offer a reverse mortgage and as a consumer, on top of familiarizing yourself with the concept, you also have to research the best interest rates, read the fine print and compare them to a reverse mortgage provider that best caters to your situation.

In Canada, it is much easier since, HomEquity Bank, is the only provider of Reverse Mortgages. However, Canadians are encouraged to familiarize themselves with the concept of a reverse mortgage and understand how the product works in order to determine if it is the best option for their financial situation. One way to do this is to get a free estimate of how much money you can get with a CHIP Reverse Mortgage. This estimate is based on your profile and home condition. You can also find out some of the frequently asked questions about reverse mortgages in Canada.

To get you started in your understanding of a Reverse Mortgage in Canada, below is some basic information about the CHIP Reverse Mortgage.

What is CHIP?

CHIP is the name of HomEquity Banks’ reverse mortgage product. It is a loan secured against the value of your home. It allows you to unlock up to 55% of the value of your home without having to sell or move. The money you receive is tax-free and you can use it towards any of your personal needs such as:

Pay off debts/Consolidate debt
Home renovations and repairs
Unexpected expenses (medical, emergency)
Financially aid your children/grandchildren
Improve or maintain your standard of living
Pay for a vacation or a special purchase

Who is eligible for CHIP in Canada?

Canadian Homeowner (own your home)
Your home is your primary residence
Age 55 or older

Why CHIP (benefits)?

No Health Checks

There are loans that require a health check to ensure that the recipient(s) (of the loan) are in good health to pay off the loan. With a reverse mortgage, since there are no regular monthly payments required until the homeowner(s) move, sell or pass away, health checks are not a requirement.

Keep Your Home And Maintain Ownership Of Your Property

Many people often ask whether the property title of the home gets transferred to the bank once the reverse mortgage is approved. The bank simply loans you a percentage of the value of your home in tax-free cash, but the title and ownership of the property remains yours. However, this means you must continue to pay your property taxes and maintain your home so that it remains in good condition.

No Regular Monthly Payments Required

The biggest advantage and feature of a reverse mortgage in Canada, is that you don’t have to make any regular monthly payments until you move, sell your home or pass away. Unlike a regular mortgage, where you have to maintain your monthly payments, a reverse mortgage lets you use the money as you please and gives you freedom from payments for as long as you live in the home. Once the homeowners move, sell the home or pass away however, the reverse mortgage including interest and principal is paid off from the home’s sale proceeds.

The Money Borrowed Is Tax-Free And Does Not Affect Your OAS Or GIS

Since the income you receive from a reverse mortgage is tax-free, it does not have any impact on your Old-Age Security (OAS), Guaranteed Income Supplement (GIS) or income from your Registered Retirement Savings Plan (RRSP) that you may be receiving.

Choose How You Plan To Spend The Money

One of the greatest benefits of a reverse mortgage is that you are in complete control of the loan and you are free to spend it on whatever needs you require it for.

You Will Never Owe More Than The Value Of Your Home

With a reverse mortgage you will be guaranteed that when you or your estate has to repay the loan, it will never exceed the fair market value of your home at the time it is sold. But keep in mind that your property must be kept in good maintenance and your property taxes and insurance have to be up to date and not in default.

Relieve Financial Stress

A reverse mortgage loan can help you consolidate your debt and clear your monthly payments so that you can live the rest of your life financially stress free!

Enjoy Retirement

A reverse mortgage loan will help you clear your financial burdens and allow you to enjoy your retirement. You worked hard your entire life, now is the time to enjoy the fruits of your labour.

Take Control

A reverse mortgage loan is essentially the money from your home equity. So take control of what you own and make it work toward your needs now!

Reverse mortgages are definitely not for everyone, but they are a great option for many Canadian seniors who are looking for that extra financial security.

To find out more about a CHIP reverse mortgage in Canada, Contact me to see if a Canadian reverse mortgage is a good option for your financial needs.

This article is the property of HomEquity Bank and has been published with permission.

How do Reverse Mortgages Affect Canadian Heirs?

Thu, 21 Apr 2022 00:00:00 GMT

For Canadian seniors, there is a great way to get the most out of the equity in their home. Home prices tend to rise and equity builds in the property. Homeowners can use their equity by accessing various types of home equity loans like, home equity lines of credit (HELOCs), re-financing or second mortgages and reverse mortgages. Some of the factors that determine the type of home equity loan that should be accessed include: age, credit history, present earning capacity, nature of monetary requirement – short term or long term, existing mortgage on the property and health of the homeowner. Senior homeowners above the age of 55, with equity in their property can opt for a reverse mortgage. The terminology of Canadian reverse mortgages can frighten some into thinking that, should they engage in a Canadian reverse mortgage, they threaten any inheritance that might be left to their spouse or children. However, Canadian reverse mortgages are an excellent way to improve liquidity and help secure a future inheritance.

Understanding Reverse Mortgages in Canada

Simply put, a reverse mortgage is taking a loan on the equity in the home. A couple can take out a reverse mortgage loan on this equity and thus have money for expenses or other needs. This can be very useful for seniors since the income from a reverse mortgage does not have any impact on Old Age Security – OAS or Guaranteed Income Supplement – GIS benefits or income from their RRSP -Registered Retirement Savings Plan nor is the income taxable. In addition, there are no loan payments to be made for the duration of the loan and the occupants maintain the ownership of the property. The loan money can be dispensed in different ways, depending on desire or need. Loan money from a reverse mortgage can be received as a lump sum, or in subsequent installments. This gives a great deal of versatility to the money from the loan. In situations where there are two spouses party to the reverse mortgage, if one passes away, the other still can maintain residency and ownership of the home.

Loan Maturation of Canadian Reverse Mortgages

Understanding what a Canadian reverse mortgage is, is only part of the equation. Reverse mortgages mature when the homeowners no longer occupy the residence. This can be due to one or both parties passing away, selling the property or moving to an alternate residence. When these situations occur, the loan reaches maturity with all interest included and the loan is due. Many times, the loan provider will specify a time to settle the estate to ensure the heirs have time to arrange for funds to settle the reverse mortgage repayment, if they so wish. Normally, the estate is sold to retrieve the reverse mortgage principal and accrued interest. Funds remaining post settlement of the loan are turned over to the estate.

Direct Benefit to the Heirs

Unlike the neighbors to the south, Canadian reverse mortgages are highly regulated in terms of both the borrower and the loan originator/provider. A living spouse is allowed to continue to occupy the property for the duration of their life or until they are no longer able to occupy the property. They are not required to make payments nor service the loan in any way. Additionally, they cannot be forced to sell the home until they no longer occupy the property. As long as all necessary upkeep such as taxes are taken care of, there are no concerns with the Canadian reverse mortgage.

Beneficiaries and or children who are entitled to the estate, are given the option to settle the reverse mortgage, or else the home is sold to satisfy the reverse mortgage loan. As mentioned previously, home prices tend to rise over time. Any monies left over from the sale of the home and, after the loan and interest are satisfied, are returned to the heirs. While various factors can affect the amount of money returned to the estate, the typical amount is 50 percent of the value of the home. Part of this is because the total amount of the loan is limited to a percentage of the equity secured as collateral.

Protection For Both Seniors and Heirs From Financial Uncertainty

One less obvious aspect to a Canadian reverse mortgage is the fact that it helps prevent, in some cases, financial insecurity brought on by a loved one passing away. In many cases, children of the property owners who engage in a reverse mortgage have homes and residences of their own. Those heirs who don’t possess their own properties, have an option of repaying the reverse mortgage and its accumulated interest and retaining the home. Alternately, they can use the remaining proceeds from the sale of the property to invest in a home of their own or handle any immediate financial needs. For seniors, a Canadian reverse mortgage is a way to supplement a fixed income, and provide security to their heirs.

Many times loved ones and future beneficiaries approve of the use of a reverse mortgage. While the exact reasons may vary, the fact that the seniors have financial security and the heirs are considered and assured, help children understand the benefits of their parent undertaking a reverse mortgage.

Canadian Reverse Mortgages are not for everyone and they are certainly not a solution for all financial problems. For those, who would benefit from a reverse mortgage however, they can make the difference between financial security and financial calamity. A CHIP Reverse Mortgage is great for giving seniors, who have equity in their home, the peace of mind that their financial well-being is assured and their children or beneficiaries are still taken care of.

This article is the property of HomEquity Bank and has been published with permission.

How Does A Reverse Mortgage Work for Older Canadians?

Thu, 24 Mar 2022 00:00:00 GMT

Living well in retirement isn’t as easy as most people envision when they’re in their youth. Utilities, medical payments, prescriptions, insurance and just day-to-day living expenses often increase more rapidly than pensions, dividends and interest income. Even when you own your home, making ends meet at the end of the month can be a challenge for seniors. That’s where a reverse mortgage can help many Canadian seniors aged 55 and older.

What Is A Reverse Mortgage?

How does a reverse mortgage work?

How can I qualify for a reverse mortgage?

What is a reverse mortgage?

These are just some of the questions that can arise while considering a reverse mortgage. A reverse mortgage is a financial product that allows Canadian seniors (age 55 and older) to tap into the equity that they’ve accumulated in their home. For many people, that equity is their largest single asset. Homeowners can access only up to 55 percent of their home equity as reverse mortgage, as long as they remain in that home. The exact amount a homeowner will receive depends on the property type, location, the home’s value, and the age of the applicant(s).

To qualify for a reverse mortgage in Canada, homeowners must use the residence as their primary home, maintain the property is good standing, stay up to date with insurance, continue to pay property tax and pay off any outstanding debts secured with the home with the proceeds from the CHIP Reverse Mortgage. Unlike other mortgages and loans, there is no health check or minimum income required with a reverse mortgage.

You will never be forced to sell or move as a result of changing home values or earning. The amount that you or your estate eventually has to repay will never exceed the fair market value of your home at the time it is sold. There’s no reason your home should ever be a burden to you or your family. The loan will be recalled only if the last homeowner passes away or moves out of the home.

Using Reverse Mortgage Funds Wisely

There are almost no conditions on how you use the proceeds of a reverse mortgage loan and homeowners are not required to make payment towards the interest or principal of the loan. This is often not the case with other types of loans or mortgages such as a Home Equity Line of Credit, or HELOC, that requires regular payments. Just a few of the smart ways how Canadian seniors can use reverse mortgage funds include:

Make improvements to your home.

Keeping up with your home’s maintenance is essential to having a safe and secure living environment. If you’ve had to put off things like replacing your roof or replacing your heating system, the funds from your reverse mortgage loans can help make these essential updates possible. Canadian seniors can also use their loan proceeds for other upgrades, such as adding a deck, replacing countertops and/or remodeling the kitchen.

Pay down debt.

High interest rates from credit cards can make it tough to ever get fully out of debt. You can get rid of some of your monthly bills by using your reverse mortgage funds to pay off those high credit card balances.

Pay off medical bills.

If a recent illness has wiped out your savings and left you with a pile of bills, a reverse mortgage can give you the funds to pay off all of those bills and allow you to sleep better at night.

Pay for leisure activities.

You can use your reverse mortgage to engage in leisure activities in retirement or enhance your lifestyle. This could include travel to various destinations – local or abroad or indulge in favorite hobbies, which may require monetary investment.

If you choose to take out a reverse mortgage loan, you keep the deed to the property. You only have to give up ownership of the house if/when you move out or sell the property. You can stay as long as you stay current on your taxes, maintenance and insurance. There’s no maximum length of time that you can live there.

Advantages Of A Reverse Mortgage Loan

A reverse mortgage loan offers a number of advantages to Canadian seniors. First, the funds you receive are completely tax-free. In addition, you can use the money any way you choose; pay off bills, remodel the house, or take a much needed vacation. Lastly, there are no payments required!

Applying For A Reverse Mortgage Loan

Canadian seniors can apply for a reverse mortgage loan from HomEquity Bank, the only provider of the CHIP Reverse Mortgage.

In order to qualify…

You (and your spouse) must be 55 or older
You must use the property as your primary residence
The balance of any existing mortgage or lien against the property must be paid off by the proceeds from the reverse mortgage (or by other funds before the reverse mortgage is taken)
Your home is in a location and of a type that HomEquity Bank typically lends on

CHIP Reverse Mortgages

Reverse mortgages for Canadian seniors are a little different from reverse mortgage products sold in the United States. All reverse mortgages in Canada are provided by HomEquity Bank, a Canadian Schedule 1 bank. The CHIP Reverse Mortgage has been assisting seniors for more than 25 years. Homeowners can get the proceeds from a reverse mortgage loan in a lump sum or in periodic advances. A reverse mortgage can be one of the choices for Canadian seniors looking for a way to supplement their monthly income. This financial product can help you get rid of debt, make necessary improvements to your home, or assist with day-to-day expenses.

This article is the property of HomEquity Bank and has been published with permission.

Home Equity Is A Big Advantage for Older Canadians

Thu, 24 Feb 2022 01:00:00 GMT

As the value of a property grows, the equity increases as well and can be an excellent source of income. Canadians homeowners age 55 or older can take advantage of HomEquity Bank’s CHIP Reverse Mortgage to access up to 55% of the equity in their home.

What does Home Equity mean?

Home equity is the real value of your property. In other words, it’s the difference between the market value of the home and the remaining balance that is owed on a conventional mortgage. For example, if your home is worth $200,000 in the market, and you owe $50,000 on your mortgage, your equity is $150,000.

The opportunity to utilize the increase in the value of your property is one of the biggest advantages of owning a home. Although the equity in your home cannot be sold, it can be used as security for a reverse mortgage. Senior homeowners in Canada can benefit from the equity in their home by getting safe and secure access through the CHIP Reverse Mortgage. The exact amount available will depend on the age of the homeowner and his/her spouse, the type of home, its location and its current market value, and any secured debts.

Put your home equity to work with a reverse mortgage

With a reverse mortgage, you can choose to take a lump sum of money or to receive funds over time. As long as the property is well maintained, and property taxes and property insurance is paid, the homeowners will continue to own their home and HomEquity Bank will never take possession.

No regular payments are required; the loan does not become due until the home is sold or both homeowners move out. Interest is added on to the original amount borrowed. When the amount is repaid, all remaining equity in the home belongs to the homeowners (or their estate).

An answer to your post retirement financial needs.

The equity in your home can be accessed safely and securely for necessities such as:

Paying off debts
To fund a college education for your children or grandchildren
Make home improvements that will increase the value of your property, or make it more accessible and comfortable
Cover unexpected medical bills or other expenses.
Pay for a hobby or travel

Whatever your needs, whether you need extra money for a vacation or just want to maintain your current lifestyle, money from a reverse mortgage can be used however you want.

This article is the property of HomEquity Bank and has been published with permission.

Are you concerned with increased cost of living?

Thu, 27 Jan 2022 00:00:00 GMT

Retirees Concerned About Rising Prices

Although free of many financial obligations of their working lives, many retirees are now worried about not having enough income to keep pace with rising prices for everything from gas to food, never mind indulging in dream vacations, renovations, and just maintaining their standard of living.

Fortunately, the solution for many seniors with money concerns is very close to home; in fact, it is their home! That’s because after years of watching the value of their homes appreciate, many retirees today have significant equity built up in their homes. Equity that can be a ready source of money they can access with a product called a Reverse Mortgage.

Reverse Mortgage is a Special Type of Loan

Basically, a Reverse Mortgage is a special type of loan that allows you to borrow against the value of your home. However (and this is a HUGE however), unlike traditional loans, you don’t have to repay the loan for as long as you own and are living in your home. This makes Reverse Mortgages appealing to seniors on fixed incomes.

In Canada, reverse mortgages are offered as the CHIP Reverse Mortgage by HomEquity Bank. They allow clients over 55 to access up to 55% of their home’s value. Given that there are no medical or income qualifications, and you don’t have to service or repay the debt until you decide to move or sell your home, CHIP can be a convenient and an affordable way to borrow money.

Although interest on the amount of a CHIP Reverse Mortgage accumulates over time, so does the home’s entire value. On average, over 50% of the home’s equity remains at the time of repayment. In more active property markets, many clients may have more equity remaining at the time of repayment than the value of their home at the time they took out a Reverse Mortgage – and they will have had the use of those funds to use in the meantime.

By offering clients access to the equity in their homes as tax-free cash, the CHIP Reverse Mortgage makes it easier to manage day-to-day cash flow with no ongoing interest payments, and no set repayment date.

In a recent Environics survey commissioned by CHIP,

45% of financial advisors said they would recommend a reverse mortgage as an alternative to depleting their clients’ investment portfolios.

50% of advisors would recommend accessing home equity instead of asking clients to reduce everyday expenses.

More than half were likely to recommend a reverse mortgage over advising their clients to sell their home and downsize.

A CHIP Reverse Mortgage should be one of the first options considered when planning long-term financial security. After years of working for your house, why not put your home equity to work for you in retirement?

This article is the property of HomEquity Bank and has been published with permission.

Do I still own my house if I get a Home Equity Loan?

Thu, 06 Jan 2022 00:00:00 GMT

Understanding home equity can be a difficult proposition if you’ve never engaged the issues before—even if you have some passing familiarity with other aspects of finance, real estate and the associated values can seem like an entirely new language.

As such, it’s no surprise that homeowners might find themselves struggling to understand whether they still own their home, what the difference between various real-estate borrowing systems entail, and how they might navigate the waters. So today, we’ll cover the basics of home equity loans and reverse mortgages, knock down a few myths, and leave you knowledgeable enough to answer questions and make informed decisions.

Understanding Home Equity: What is a home equity loan?

A home equity loan is a type of loan where you utilize the equity of your home—the difference between fair market value and the outstanding balance of all liens on the property—as collateral for a loan. This creates an additional lien against the property and can be used to fund whatever you need.

Understanding Home Equity: How do I get a home equity loan?

Typically speaking, home equity loans require good to excellent credit, as well as a reasonable loan-to-value and combined loan-to-value ratios, i.e. it needs to be a safe bet for the lender. If you meet those standards, you’ll want to approach a lender, such as your bank, and choose from the terms they provide. Specifics will vary greatly depending on the size of the loan, your repayment goals, and of course the values inherent in your home.

Understanding Home Equity: Home Equity Loan Myths.

Home equity is a subject rife with misunderstandings and myths. Here are few to be aware of:

Pre-approval is a guarantee:

This isn’t at all true—pre-approval only means that you have a lender’s interest. They may still renegotiate or back out of offering you a loan when they get a better look at your situation.

I need to spend the money on the house:

This is a common use of home equity loans, but not a rule—you can use the loan to pay for a new car, or college, or anything. It’s a lump sum loan against your equity, to spend as you prefer.

If I default, I won't really lose my house:

There are some situations where default on your home equity loan won’t lose your house, but they’re few and far between. A home equity loan is a huge risk, if you’re not going to be 100% comfortable making payments—if they were easy to slip out of, banks wouldn’t offer them.

Understanding Home Equity: What about a HELOC?

A HELOC, or Home Equity Line of Credit, is an alternative to the lump-sum payment typically offered by a home equity loan. Instead of fixed terms and a fixed lump sum, you receive a line of credit pegged to a variable interest rate. This offers advantages and disadvantages to the borrower; you can borrow what you need when you need it, but the rates will often be less advantageous to you than you would experience with a traditional lump-sum loan.

HELOCs often offer advantages for savvy tax planning and are viewed more favorably than a second mortgage by anyone considering debt, as well. Outside of these notable differences, however, a HELOC offers many of the same limitations, risks, and benefits of a traditional home equity loan—a failure to repay will lead to foreclosure and the loss of your home.

If a home equity loan doesn’t sound quite right to you at this point, read on–there are many other ways to tap the value of your home. The current rising star of home finance is the reverse mortgage—the home equity loans close cousin.

Understanding Home Equity: What is a Reverse Mortgage?

Reverse mortgage loans are a special form of loan, typically only available to seniors, which allows people to access the equity of their home without selling. Essentially, a reverse mortgage is a home equity loan with the interest and principal deferred so long as you occupy the premises. If you move out or pass away, the loan comes due and debt collection begins. This makes a reverse mortgage an excellent source of funds if you’re planning to stay in your current home indefinitely, and aren’t worried about passing the home on free and clear to an heir.

Understanding Home Equity: How do I get a reverse mortgage?

Depending on the nation, the rules for reverse mortgages may be different. In Canada, for example, they’re restricted to homeowners over the age of 55. Unlike a typical home equity loan, however, your credit standing and income won’t matter. Once you meet the age requirement established by your country, you must approach an approved provider of reverse mortgages and submit an application. You’ll need to determine how you wish to receive the money, as reverse mortgage loans offer a high degree of flexibility; you could receive a lump sum, regular payments to supplement income, an open line of credit attached from which you can charge a card or write checks, etc. This will all need to be worked out with the loan provider, as will an assessment of your equity.

Understanding Home Equity: Reverse Mortgage Myths.

As they’re less well-known than other financial services, reverse mortgages are the source of countless myths and misapprehensions. Here are a few to be aware of and move past:

A surviving spouse will lose the home or have to begin payments.

If your surviving spouse signs with you, then the loan will continue to be deferred until they pass or sell the home.

I have to sign my house over to the lender.

When you borrow with a reverse mortgage, you retain full and complete ownership of your house.

Reverse mortgages are costly.

The same regulations covering other lending practices protect homeowners against excessive fees for reverse mortgages, keeping them fair and reasonable.

You can’t reverse-mortgage a home with an existing lien on it.

You’re borrowing against your equity, meaning you can borrow even if your home still has a lien on it—in fact, you can use a reverse-mortgage to clear other liens, if you like.

The lender can force me to move out and repay the loan.

Again, you maintain full ownership of your home under a reverse mortgage—the lender cannot compel you to move or force your hand in any way.

Heirs can end up paying more than the house is worth.

Even if you end up receiving more than the value of your home under a particular plan, the debt accrued can never exceed the value of your home—so your heirs will NEVER have to pay more than your home is worth.

Final Thoughts

Ultimately, the best way to access the equity of your home today will depend upon your income, age, aims, and credit. Many find a traditional equity loan ideal for their purposes—others find the deferred debt of a reverse mortgage far more useful and palatable. Regardless, incurring any debt, even one you don’t expect to come due until after you pass, deserves careful consideration and deliberation. Choose wisely, and make the most of your home’s hidden value.

This article is the property of HomEquity Bank and has been published with permission.

Reverse Mortgage – Myths Clarified

Fri, 27 Aug 2021 00:00:00 GMT

Just what is a reverse mortgage? You may have heard about this financial product. Maybe a friend or a friend of a friend has one. However, there’s a lot of misinformation out in the world about these types of loans.

Nearly 70 percent of Canadians own their own home. For the vast majority of those homeowners, their home is their largest single investment. That can be frustrating as people retire and see the value of their home increasing and their monthly income decreasing. One easy way to get access to some of that money in your house is with a reverse mortgage.

What is a reverse mortgage?

Simply put, a reverse mortgage is a financial product that allows Canadian homeowners age 55 and older, who either own their homes completely or who have a sizeable equity in their homes, to get up to 55 percent of that equity to use for things like medical expenses, home repairs, visits to see their grandkids or simply day-to-day living expenses. When you take out a reverse mortgage in Canada, you don’t have to choose between staying in the home where you’ve created memories for decades and moving so you can live comfortably in your retirement.

The way a reverse mortgage works is that as long as you live in your home, you’re not required to make any principal or interest payments to repay the amount of equity you’ve used. (Of course, you’ll still be responsible for your property taxes, homeowners’ insurance and maintaining the property in good standing.) The loan becomes due when you move or pass away. If you have heirs, they can pay the outstanding loans from their own funds, or use the funds from the sale of the property.

In order to qualify for a reverse mortgage, you or your spouse must be at least 55 years of age. (However, the older you are, the more money you are likely to qualify for.) The property also needs to be your primary residence, not a vacation home or a rental property. Some mobile homes may not qualify for this type of loan – it is best to check with HomEquity Bank, the only providers of reverse mortgages in Canada.

Reverse mortgages in Canada differ somewhat from similar products offered in the United States.

Reverse mortgage myths debunked

There’s a lot of conflicting and inaccurate information circulating out there about reverse mortgages in Canada. To help you better understand this product, we’ve listed just a few of the more common myths below:

1. Reverse mortgages are a new product.

Reverse mortgages have been available in Canada for more than 25 years.

2. Many people are dissatisfied with their reverse mortgages.

According to a recent survey by HomEquity Bank, 94 percent of reverse mortgage customers would recommend this type of loan to others.

3. Your children will lose the family home.

Your heirs have the opportunity to pay off your reverse mortgage after you pass away and keep the property. Plus, the program guarantees that they will never owe more than the fair market value of the home, should market conditions change.

4. You have to be “old” to get a reverse mortgage.

Reverse mortgages are available to Canadian homeowners age 55 and older. Of course, the older you are when you apply for the loan, the more money you are likely to qualify for.

5. You no longer will own your home.

You will continue to own your home after you receive funds from your reverse mortgage and you will remain on title until you pass away or move out of the house.

6. I’m guaranteed 55 percent of the equity in my home.

Unfortunately, this is not the case. The amount you receive from the reverse mortgage loan will depend on the market value of your home, the location and property type, and the age of the homeowners. The maximum you could receive is 55 percent of the equity in your home.

What IS true about reverse mortgages

1. You have to stay current on property taxes and insurance.

Just as before, you are required to keep paying your taxes and insurance after you receive the money from your reverse mortgage loan.

2. There are no payments required.

As long as the homeowner(s) remain in the home, there are no payments required on either principal or interest of the loan.

3. You can stay in your home as long as you want.

No one is going to force you to move if you take out a reverse mortgage loan. That’s true whether you take out the loan at age 55 or age 80.

So you see, most of the negative things that you may have heard about reverse mortgages in Canada are simply not true. Federal and government agencies do provide some income sources like Canadian Pension Plans, Old Age Security Pension Plans and other benefits to seniors. A reverse mortgage may not be the right solution for every senior homeowner, however, this financial product can help many older Canadians tap into the value they’ve accumulated in their homes and use those funds to boost their monthly income.

This article is the property of HomEquity Bank and has been published with permission.

Understanding Home Equity Loan and Mortgage Options in Canada

Mon, 24 Aug 2020 23:00:00 GMT

For older Canadians – living on a set income can be difficult. To make matters worse, unexpected medical events and many other financial matters arise that can make a tight financial situation even worse. As a result, a growing number of seniors in Canada turn to the equity in their home as a source of financial relief.

What Is Home Equity?

Home equity can be defined as the actual value of your property. Simply put, home equity is the difference between what you owe on your home and your homes fair market value. For instance, if your home has a market value of $300,000 and you only owe $50,000, you have $250,000 of equity in your home.

One of the biggest advantages of home ownership is the opportunity to build equity. Even though you may not be able to sell your equity, home equity loan options allow you to access the equity in your home to take care of any of your needs, expenses, or to simply live a higher quality of life. Generally, there are three different types of home equity loan options for seniors: a home equity line of credit, a second mortgage, and a reverse mortgage. The following information explains each of these three options in detail.

What Is a Home Equity Loan?

A home equity loan is a type of loan in which the borrower uses the equity of his or her home as collateral. Home equity loans are often used to finance major expenses such as home repairs, medical bills, a new car, university tuition for child, or other contingencies faced by homeowners. Home equity loans can be used only as re-finance options and not as collateral to purchase a new property.

What Is a Second Mortgage?

Home equity in Canada can be used as collateral for a second mortgage on your home. The bank issues you a cheque in a lump sum based on the available equity in your home for you to spend as you like. A second mortgage typically has a set amount of time you have to repay the loan (term) as well as fixed interest rate. After you have received the proceeds from your loan, you need to make monthly payments on the second mortgage until its paid in its entirety.

What is a Home Equity Line of Credit (HELOC)?

A home equity line of credit (HELOC) is similar to a second mortgage. However, the issuing financial institution doesn’t release all of the funds in one lump sum. The money can be accessed as you need to or when you choose to for whatever reason. For example, if you have $200,000 of available equity and have a HELOC for $125,000, you can access these funds using similar features as you would for a chequing account. You will only be responsible for paying interest on the amount of equity you actually use.

A few typical characteristics of HELOCs are:

Fluctuating interest rates

In many cases, lenders offer a special low “introductory rate.” However, this rate will commonly increase after a month or two. While HELOCs may seem to be the best way to access the equity in your home, the fluctuating interest rates can cause your payments to drastically increase.

Advance periods

The majority of HELOCs have what is known as an advance period, which is a set period of time you are allowed to access the money in the HELOC. This period can be five years, ten years, etc. After the advance period is over, you are not able to withdraw any additional money. More importantly, following the advance period is the repayment period, which is the time you are supposed to repay any borrowed monies.

Reverse Mortgage Home Equity Loans

If you are a homeowner in Canada and are 55 years of age or older, you may qualify for a reverse mortgage. A reverse mortgage is designed for you to convert the equity in your home into cash to help pay for increased living expenses, health care costs, a home renovation, a vacation, or anything else you need. While traditional mortgages require you to pay monthly payments, a reverse mortgage does not require monthly payments. With a reverse mortgage the bank makes monthly payments or a lump-sum payment to you based on a percentage of the value and equity of your home, your age, amount of secured debt, property type, and property location . You continue to live in your home and must meet certain requirements. Reverse mortgages are designed to offer you another stream of income so you can spend your golden years living comfortably. After you are deceased, move, or sell, the loan will be reconciled with the value of the property.

Key Differences in Home Equity Loan Options

Disbursing funds

Reverse mortgages offer an enhanced level of flexibility. You can receive monthly payments or you can choose to receive a large lump sum payment.
Home equity lines of credit allows you to access the funds through a credit card and/or a checkbook. However, it’s important to understand you will only be able to access this credit line during a set advance period. After the period has expired, you will be expected to begin repaying the balance.
Second Mortgages in Canada disburse the proceeds in one lump sum payment.

Repayment

Reverse mortgages offer the premier and most formidable solution for seniors in Canada with deferred repayment. This means your loan will only become due if you become delinquent on your insurance and/or property taxes, you move, if the home falls into disrepair, you sell the home, or you pass away. In most cases, a reverse mortgage is repaid from the sale of the home after the death of the homeowners. This allows the seniors to live comfortably, vacation, and enjoy time with their family while they are alive without amassing a significant amount of secured debt.
HELOCs have a repayment function based on the amount that was borrowed as well as the current interest rate. Considering interest rates change, your monthly payment could be affordable one day and unaffordable the next. This repayment option is the least favorable for individuals who are on a set income. It may become a challenge for seniors to service the debt, especially if they are looking for home equity loan options to supplement reductions in income during retirement. Seniors may find it difficult to qualify for a HELOC as there are income requirements. They may stand to lose the property to repay the loan, if the lending institution decides to recall the loan.
Second Mortgages set monthly payments based on a fixed interest rate, which is more favorable than the HELOCs’ fluctuating payments, but less favorable than the terms of a reverse mortgage.

Second mortgages, reverse mortgages, and HELOCs all enable you to get cash out of your available equity. While they have this in common, they differ in terms of disbursement, repayment, and several other areas. If you are over the age of 55 and are interested in a source of long-term income, reverse mortgages are the premier solution.

Reverse mortgages are designed to allow you to truly enjoy your golden years in your home. With the proceeds from reverse mortgages, you can pay off debts, renovate your home, cover health care costs, help family members, take a vacation, and live comfortably. These types of home equity loans offer you another stream of income, so you can enjoy the rest of your life.

This article is the property of HomEquity Bank and has been published with permission.

Government Services and Benefits for Retirees

Tue, 26 May 2020 00:00:00 GMT

As more and more Canadians are entering their golden years and heading into retirement, it is important to remember that seniors in this country are eligible for many benefits, services and programs on a federal, provincial and municipal level. Once you arrive at the age of 65, you are legally a senior in Canada and are privy to the Government of Canada’s website dedicated to information for seniors. These websites are also a great tool to assist Canadians with retirement planning.

Government Of Canada – Website for Seniors

http://www.seniors.gc.ca/eng/pie/saei/index.shtml

This website allows you to choose your province of residence and provides you with an array of information including provincial programs for seniors, federal benefits and pensions as well as federal tax information, application instructions and forms for Old Age Security (OAS) and Canada Pension Plan (CPP).

Benefits

The website also gives you access to a Benefits Finder tool, which allows you to receive a customized list of benefits that pertain to your personal situation and eligibility by answering a short list of questions. Each province and situation has different eligible benefits and by answering these questions, you can have a good sense of what you and your dependents are qualified for.

http://www.canadabenefits.gc.ca/f.1.2cw.3zardq.5esti.4ns@.jsp?lang=eng

Physical activity, healthy eating and maintain a healthy home

There is even an information guide on the website giving tips and advice for seniors to stay active, engaged and informed. This includes advice for physical activities, healthy eating and maintaining a safe and healthy home.

http://www.seniors.gc.ca/eng/pie/saei/index.shtml

Tax information

One of the links on this website is Tax Information from the Canadian Revenue Agency (CRA). This link provides seniors with specific information related to filing taxes as a senior, including CPP and OAS information as well as medical expenses and many other common topics pertaining to seniors and their taxes.

http://www.cra-arc.gc.ca/seniors/

Please make sure to take advantage of this informative tool for seniors. Whether you are entering your golden years yourself or you are helping a senior with retirement planning, it is always good to stay ahead of the game and be prepared to enroll in the benefits and services/programs that the Canadian government has to offer.

This article is the property of HomEquity Bank and has been published with permission.