Featured post

Welcome to my website Learn About Reverse Mortgages

As a mortgage broker one of my roles is to provide the information that my clients need in order for them to make the best financial decision.

This website has been designed to help you understand what a reverse mortgage and if this is an option for you to consider more. It does not provide the answer to the question should you get a reverse mortgage. Any decision to get a reverse mortgage or any mortgage should only been made after a proper review of your personal situation, both where you are right now and where you want to get to.

If after looking at the information on the site you think this is an option you should consider I will calculate for you how much you can expect to get using my reverse mortgage calculator.
In addition I will provide you with a personal mortgage plan that will help you decide if you want to proceed with a reverse mortgage. This review will include a comparison of the cost to set up the different options and what interest rates apply to reverse mortgages.

I hope that the website helps you on your financial journey. Please do not hesitate to call me at 604-961-2400 if you find it easier to just talk things through.
Lawrie

Will interest rates increases slow in 2019?

Since July of 2017 the Bank of Canada has raised interest rates five times. And up until December of 2018 the Bank of Canada maintained that its key bank rate would need to continue to increase until it got to their toward its estimated “neutral range,” of between 2 ½% and 3 ½%. That would have meant that rates would need to go up by an additional ¾% to 1 ½% higher than today’s rate of 1 ¾%.

In December of 2018 the Bank of Canada maintained their rate at 1 ¾% and in their comments indicated that rates may not go up as quickly as they expected. They based this on the fact that the Canadian economy was slowing as a result of lower oil prices, weaker consumer spending and a slowing housing market.

At the first meeting of 2019 the Bank of Canada again decided to keep their overnight interest rate at 1 ¾% and mentioned the same concerns as they had mentioned in December.

So what happens for the rest of 2019? Predicting where interest rates are headed is always a challenge and if you look at the chart below you can see what the economists at the banks think. For the most part it seems that most lenders are saying that the increase in interest rates will slow in 2019 and that the increase will be between ¼% and ½%. It is in 2020 that you start to see more of a split in the predictions with some analysts predicting that rates could actually drop by the end of 2020. This drop in rates is based on the risk that there could be a recession at some point which would see the Bank of Canada drop rates to help get the economy going again.

 

2019 2020
Lender Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
               
CIBC 1.75 1.75 2.00 2.00 2.00 2.00 2.00 2.00
Desjardins 1.75 1.75 2.00 2.00 2.25 2.25 2.25 2.00
National Bank 1.75 1.75 2.00 2.25 2.25 2.25 2.25 2.00
RBC 1.75 2.00 2.25 2.25 2.50 2.50 2.50 2.50
Scotia 1.75 2.00 2.25 2.50 2.75 2.75 2.75 2.75
TD 2.00 2.00 2.25 2.25 2.50 2.50 2.50 2.50

 

Looking at the bond markets provides additional support for the idea that interest rates will not be moving higher by a significant amount. Government of Canada bonds are as of January 9th yielding 1.91% for a two year term, 1.91% for a five year term and 1.98% for a ten year term. The bond traders are not asking for any premium to lend money out for longer which is a sign they don’t expect much of a change in interest rates.

So what does that mean for you? If your mortgage is up for renewal you may want to consider either a variable rate or maybe a shorter fixed term in the two to three year range. One of the things I can do for you is prepare a comparison of the different options to help you decide which is best for you.

If you have any questions about your mortgage call me at 604-961-2400.

Lawrie

Reverse mortgages may be the least costly way to access the equity in your home!

Is a Reverse Mortgages may be the least costly way to access the equity in your home?

One of the consequences of all the mortgage rule changes made by the government is that lenders are now required to place more emphasis on the borrower’s income and their ability cover the cost of their mortgage payment.

Under the old lending guidelines retires who were relying on CPP, OAS and maybe some small work pensions could go into their bank and take out a line of credit at the best rates and this line of credit could be used to help supplement their income until they were ready to downsize or move to an assisted living arrangement. These lines of credit were typically at prime plus ½% to 1%, the as what any homeowner could get.

Gone are the days where lenders could just rely on the fact that the client had good equity in their home. In the past if lenders limited the amount of the mortgage to less than 65% of the value of a property they often times did not even request any confirmation of the borrowers income. The government has made it clear that equity in a property is only one factor lenders should consider and if they cannot confirm that the client has enough income to make the mortgage payment lenders should not be providing a mortgage regardless of how much equity a client has.

So what financing options are available to seniors that have limited income coming in, lots of equity in their homes but are just not ready to sell their homes at this time.

There are still some lenders that will allow a higher percentage of a borrower’s income to go towards their monthly expenses. These lenders charge interest rates that are a little above the best rates available and a little lower than what is available with a reverse mortgage. The challenge with this option is that in most cases the borrower must take all the money upfront which results in a higher interest costs and a larger monthly payment.

Reverse mortgage interest rates fit in just above these rates but with the advantage of not needing to take all the money upfront. By only drawing money when you need it you can reduce the interest costs over the life of the mortgage. The other big plus is that with the reverse mortgage there are no monthly payments so you can lower the amount you need to borrow each month as you don’t have to borrow to cover the monthly payment on the line of credit or mortgage. And reverse mortgages are not based on how much income you are currently receiving. They are considered to be equity loans.

Currently the only other source of equity loans is through the mortgage investment corporations or private lenders. These lenders typically require to take all the money upfront but may be flexible in terms of making monthly payments. However, these loans will typically be priced at 1 ½% to 2% or more above the rates being offered by the reverse mortgage companies. So not only are you paying a higher interest rate you are paying the higher interest rate on all of the money right away.

Now this does not mean that a reverse mortgage is right for everyone but what it does mean is that it is important to carefully look at all your options before making a decision and to see which options results in the lower cost over the period of time you need to borrow the money. In some cases a higher interest rate can result in a lower overall cost if you only need to access a small amount each month to help with your living expenses.

If you have any questions about reverse mortgages or would like to explore what options you may have you can call me at 604-961-2400 for a no cost, no obligation mortgage review.

Lawrie

 

In order for you to be approved for a reverse mortgage, there is specific criteria that the underwriting team reviews. Outlined below are several key areas HomEquity Bank considers before approving your reverse mortgage.

Criteria

Do you meet the minimum requirements?

  • Homeowners must both be 55 or older, own the home, and live in a province.
  • The appraised home value must be at least $100,000.
  • Secured debt is less than what the amount a client is approved for.

 

What is the property type?

  • HomEquity Bank will provide a reverse mortgage on most home types (detached, semi-detached, townhomes, condos, mobile homes).
  • Exceptions include: the three territories (Nunavut, Northwest Territories, and Yukon), or on native reserves.

 

How will the funds be used?

Did you know that reverse mortgage funds can be used in many ways? Such as:

  • Travel, medical expenses, and an early inheritance to children.
  • More commonly, many homeowners use the funds to purchase property.

 

How much can they be approved for?

Below is an example of how much you can get with a CHIP Reverse Mortgage. Your age is one of the determining factors when calculating the percentage. In general, the older your clients are, the more they can get approved for.

 

Protecting the remaining equity in the home is important to HomEquity Bank and our conservative lending rules allow you to retain more of the equity in your home. If you want to see how much equity you will retain I can provide you with an analysis.

 

This chart is for illustration purposes only. It is based on a husband and wife who are the same age. HomEquity Bank will lend less on rural properties and non-detached homes or condos.

 

 

Age Approximate Loan to Value
55 11 – 14%
60 16 – 21%
65 22 – 30%
70 26 – 37%
75 32 – 44%
80 37 – 53%
82+ 39 – 55%

 

 

This chart is for illustration purposes only. The amount you will be approved for may be adjusted due to many factors such as home type, location, outstanding home mortgage amount, single homeowner compared to dual homeowners.

 

All secured debt must be paid from the approved amount. If the estimated amount is not sufficient to pay out all secured debt, please contact your Business Development Manager.

 

For more information, please contact me at 604-961-2400.

More competition may mean better interest rates on reverse mortgages>

Better interest rates for your reverse mortgage!

For many years there had only been one lender in Canada that offered a reverse mortgage that is until today when Equitable Bank announced the launch of their Path Home Plan mortgage.

With the reverse mortgage market growing each year it was only a matter of time before someone saw the potential in this market.

For now the interests rates being offered are no better than what is being offered through HomEquity Bank but that could change over time as the lenders work to gain market share. At the very least it may help to keep reverse mortgage interest rates in check.

This does not mean that interest rates on reverse mortgages will drop to the same level as a traditional mortgage. Reverse mortgages are based on the equity in the home, not on the borrowers income level and as with mortgage based on equity there will always be a higher interest rate.

That said reverse mortgages provide other benefits that may make this the best option for some borrowers. Some of those benefits include:

  • No mortgage payments
  • Tax free access to the equity in your home
  • You still own and live in your home

Do you want to find out more?

Get your free reverse mortgage guide

How to improve your monthly cash flow with a reverse mortgage.

Craig and Dawn S.,Hamilton, Ontario reverse mortgage customers

Craig, 82 and Dawn, 75, have been living in their classic suburban home for many years. Over the years, they started to notice their home deteriorating and their old car was in desperate need of repairs.

Craig spoke to his sister Colleen who suggested he look into a Reverse Mortgage to access cash and invest some of the money to improve their monthly cash flow.

Craig and Dawn successfully accessed a full 40% of their appraised home value.

With no regular payments required, Craig and Dawn were able to preserve their existing RRIF investment portfolio, replace their car, make minor home renovations and create a monthly income stream with the remaining balance.

Dawn said,

“To be able to come up with a financial solution specifically for our needs and not have to worry about the consequences on our lifestyle is the ideal situation, and we are so grateful for it.”

Learn more about how a reverse mortgage could work for you!

HomEquity Bank makes changes so it is easier for borrowers to understand their reverse mortgage options

It is always nice when a lender takes the feedback they receive from their customers and business partners and makes changes to improve their products.

HomEquity Bank the provider of the CHIP Reverse Mortgage and Income Advantage products is one of those lenders. The Income Advantage product was designed to provide borrowers with an on-going stream of income to help people supplement their other sources of income. However, this program did not allow seniors to access as much equity that they could under the CHIP Reverse Mortgage. In addition some customers had commented that it was difficult to understand which option was best for them.

With that in mind, the following changes were made to make it easier for borrowers to understand their options. Here are the details:

  1. Monthly or Quarterly Advances – If you want the convenience of regular deposits into your bank account then the Income Advantage product is for you. If you are looking at larger lump sum deposits then the CHIP Reverse Mortgage is the best option for you.
  2. Maximum Loan Available – Both the Income Advantage and CHIP Reverse mortgage now allow you to access up to 55% of the value of your home.
  3. Interest Rates – Both the Income Advantage and CHIP Reverse mortgage will offer the same interest rates.

Look at the table below to see how the Income Advantage and Chip Reverse Mortgages now compare:

We have had so many changes to the mortgage rules in the last few years and with each rule change it has become more and more difficult for the average person to understand what is the right mortgage option for them. Nice to see a change that makes things easier to understand.

If you want to find out if a Reverse Mortgage is the right option for you please give me a call at 604-961-2400.

Lawrie Thom

 

Are the myths stopping you from considering a reverse mortgage?

Even though Reverse Mortgages have been available in Canada for over twenty-five years there are still a lot of myths surrounding this mortgage product. With more and more of Canadians wealth tied up in the equity in their homes is it time to take a fresh look at some of these myths.

Myth #1 The Lender will own my home

This is not true. You retain the title to your home. A reverse mortgage is registered against the title to the home in the same way as a conventional mortgage or a home owner’s line of credit.

Myth # 2 The Lender will end up owning my home

This is false. According to HomEquity Bank the average homeowner has well over 50% of the value of their home left to enjoy after repaying their reverse mortgage.

Myth # 3 Your children will have to pay if the mortgage exceeds the value of the home

This is also false. In fact unlike a regular mortgage the reverse mortgage program guarantees that neither you or your family will ever owe more than the value of the home.

Myth # 4 You can be forced to sell your home

This is false. You maintain complete ownership of the home and under the terms of the reverse mortgage you can never be forced to sell your home.

Myth # 5 Most people are dissatisfied with their reverse mortgage

This is false. A recent survey by HomEquity Bank found that 94% of Reverse mortgage customers would recommend a reverse mortgage to others.

A reverse mortgage may not be for everyone but for anyone that is house rich, but cash poor it may be one way to stay in your own home and enjoy retirement on your own terms.

If you have any questions about reverse mortgages please call me at 604-961-2400.

Lawrie