With the housing and financial markets on solid footing, some retired Canadians may consider cashing in their growing assets to enjoy vacations and major home renovations. Others, on the other hand, are evaluating tax-neutral solutions like a reverse mortgage to supplement their retirement income.
A CHIP Home Income Plan from HomEquity Bank is a simple and sensible financial solution for any senior aged 55 and over regardless of income, credit history or medical status. Also known as a reverse mortgage, it offers homeowners up to 50 per cent of the value of their home to use as tax-free cash to improve their day-to-day cash flow or finance larger activities like home renovations or family vacations. Furthermore, borrowers have the flexibility to choose how they want to receive the money – either in one lump sum advance or as planned advances over a set period of time and there are no payments required until the home is sold or both homeowners move out.
There are many ways to use home equity through a reverse mortgage:
• Use it to supplement an insufficient monthly income by redeploying a portion the home’s equity into income generating investments.
• Use it to preserve investment assets without worrying about withdrawing RRIFs above the annual minimum or selling non-registered investments to cover living expenses.
• Use it to travel, invest in a hobby or second career, help the kids or hire in-home help.
• Use it to pay off high interest debts and increase monthly cash flow.
CHIP Home Income Plans are provided by HomEquity Bank to senior homeowners with no credit, income or credit qualifications. You can obtain more details by contacting us at 250 862 1806 or [email protected].
If you have less than 20% down payment, mortgage insurance is required through Canada Mortgage & Housing (CMHC), Genworth or Canada Guaranty. Homeowners no longer need the minimum 5% down payment from their own funds to purchase a home. You can now use borrowed funds for your 5% down, but keep in mind that there are higher credit criteria and your insurance premiums increase.
Down payment from your own resources (non borrowed):
You must supply verification satisfactory to the lender of accumulated savings from non-borrowed funds. This may be in the form of:
- Copy of your bank statement or bankbook (including cover) showing a minimum three-month history. Any large deposits during this time period must be explained and documented.
- Copy of RRSP statement, term deposits, CSBs, or other investments.
Down payment from a gift (non borrowed):
All or part of the minimum equity requirement (5% for down payment plus 1.5% for closing costs) may be provided by way of a financial gift, as long as all of the following conditions are met:
- The donor is an immediate relative of the borrower (recipient); and
- The Approved Lender has verified that the money is a genuine gift; and
- The Approved Lender has verified that the funds are in the borrower’s (recipient’s) possession at least 15 days prior to closing.
The Approved Lender will verify the authenticity of the gift by obtaining a written confirmation, signed by the donor and the borrower (recipient), which will include the following points:
- The money is a genuine gift from the donor and does not ever have to be repaid;
- No part of the financial gift is being provided by any third party having any interest (direct or indirect) in the sale of the subject property.
Borrowed down payment:
Effective March 1, 2004, homebuyers can get their down payment from borrowed sources that include:
- Lender cash back incentives;
- Personal loans, lines of credit or credit cards;
- Unsubstantiated gifts.
When using a borrowed down payment, there are a higher credit criteria and also increased insurance premiums.
Down payment from the sale of an existing property:
You will be required to provide a copy of the unconditional Agreement of Purchase and Sale on your existing property. This needs to be accompanied by a copy of a recent mortgage statement showing the balance owing on any mortgages presently registered against the property. The difference between the sale price and the mortgages owing will substantiate the funds available for your down payment.
If you have any questions regarding your down payment or any other mortgage related question please call (250) 862 1806 or email [email protected].
There seems to be a lot of confusion around the term pre-approval when it comes to mortgage pre-approvals. Pre-approvals can range from a client giving a lender or mortgage broker their income and asking how much mortgage they qualify for to a full documented pre-approval with all the necessary paperwork to back up the application. It is important for a borrower to know the difference.
It is imperative that the lender or broker complete an application with the purchaser to obtain not only their income but also any other financial obligations that they may have such as loans, credit cards, and child support. These other financial obligations can impact the amount of mortgage that a borrower may qualify for. This information can be verified by obtaining a credit report which will confirm the outstanding balances of these obligations. Many applicants these days are hesitant to have a credit report pulled as they fear it may lower their credit score but, often not pulling one can create frustration during the final approval when unexpected debts or late payments surface.
The most secure pre-approval is one in which every aspect of the buyer’s application has been verified. Here is a list of some of the information that may be helpful to obtain prior to meeting for a pre-approval:
1. Employment letter stating the position, time on the job, salary or hours and the prospects for future employment.
2. Recent paystub – is a secondary confirmation and should agree with the letter.
3. Notice of Assessments for two years. These are often obtained if the borrower is hourly or has recently started a new job.
4. Confirmation of down payment – a minimum of three months history showing the accumulation of savings towards the down payment.
These are some of the basics that can assist a lender or mortgage broker in giving you a pre-approval that is fairly solid and not subject to a lot of conditions.
If you require further information or would like to set up your FREE strategy session for a pre-approval please call 250 862 1806 or email [email protected].
For these and further information on saving money on your mortgage please call 250-862-1806 or email [email protected].
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