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Finance

Reverse mortgages

Do you know there is only one reverse mortgage provider in all of Canada?

Do you know they became a schedule one bank in late 2009?

Do you know how much the program has evolved and improved?

With nearly 30% of the Canadian population in retirement, and with over half of those retired still carrying debt, the Canadian Home Income Plan, provided by HomEquity Bank, is becoming a go-to solution for many senior homeowners. It is supported and encouraged by mortgage brokers, all major banks, many credit unions, numerous lawyers, financial planners, and more.

Why are there more people using and referring a reverse mortgage in Canada today than ever before in 29 years of business?

• Many senior homeowners have equity in their home, but have limited monthly income

• Traditional lending guidelines are strict, and many don’t have the income or credit to qualify

• The funds are completely tax free, helping to maximize tax efficiency and government supplements

• CHIP is simply a mortgage for homeowners age 55+ where making payments is optional and approval is easy

• Clients can access up to 50% of the value of their home in tax free cash, depending on their age and property type/location

• The money doesn’t have to be taken all at once. Simply advance funds as needed, and never worry about making a mortgage payment

• HomEquity Bank is paid back the principal and unpaid interest when the last applicant has left the home or they have sold

• Set up fees consist of only an appraisal and legal fees. There are no hidden or annual/renewal costs that keep adding to the balance

• Most current rates are between 3.95% and 5.49% depending on the term chosen

• Clients are guaranteed never to owe more than the fair market value of the home at the time it is sold

• Over time, the housing market tends to appreciate, and in most cases it has gone up in value as much or more than the CHIP balance has climbed, leaving lots of equity.

If you or maybe your parents are age 55+ and have equity in a house, townhouse, or condo, but are just finding things a little tight, or need access to a lump sum of money, CHIP might be the right solution.

Uses for CHIP:
  • Pay off your mortgage and get rid of the payment
  • Debt Consolidation
  • Access funds to renovate or travel
  • Access monthly cash flow to help cover expenses
  • Help Children
  • Estate Planning
  • Investment
  • Unexpected Life Events
  • Pay for in-home care costs
  • Or just to live a better retirement
     

If you would like more information on reverse mortgages and whether one might be right for you please call 250 862 1806 or email [email protected]



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Mortgage policy changes?

There are rumours circulating again that the federal government may move to tighten mortgage insurance criteria.  This is prompted by a recent article in the Financial Post.
 
The housing market while busy is far from hot.  Vancouver and Toronto are seeing rapid price growth but this is mainly due to the restriction and the supply of building lots for new homes.  In both cases the issue is lack of supply not mortgage lending.  In other markets home sales and price growth have been moderate over the past several years.  The recent flutter of activity is due to the fall of mortgage rates to another all time low.
 
According to the Financial post the measures being considered are:
  • Increasing the minimum down payment from 5%
  • Shortening the maximum amortization prior from 25 years (possibly to 20 years)
  • Limiting mortgage insurance for high-priced home.
The article states that no decision has been made but changes are being considered.
 

Higher Down Payments

The Canadian Association of Accredited Mortgage Professionals (CAAMP) recently did a survey of those Canadians who had purchase a home during 2013 up to May 2015.  I n the report titled "A Profile of Home-Buying in Canada they asked :

"If the minimum down payment requirement was 10% instead of 5%, would you still have been able to afford to purchase your current residence?"
 
Six per cent of the buyers (or 35,000 per year out of 620,000 homebuyers) said they would not have been able to make the purchase.  A further 13% (80,000 buyers per year) probably would not have been able to buy a home.
 
The absence of these buyers 35,000 or more, from the market would have significant impact on the sales activity, leading to downward price pressure, and an impact on the Canadian economy.  House prices have an important role in consumer confidence and are a driver of job creation.
 
The loss of at least 25,000 first-time buyers would would have made it extremely difficult for move-up buyers to sell their existing homes.  This would have prevented their purchases.  The effect would be a much larger negative impact on the housing market and the broader economy.
 

Fortunately 62% of all buyers (380,000) definitely would have been able to make the purchase and a further 20% (125,000 buyers) probably would have been able to make the purchase.

 

Table 1:  Impact on Ability to Purchase Current Home if Minimum Down Payment was 10%

  1st Time Buyer 2nd Time Buyer

Subsequent Purchases

All Buyers
Definitely Able 130,000 85,000 165,000 380,000
Probably Able 75,000 25,000 20,000 125,000
Probably Not Able 50,000 10,000 15,000 80,000
Definitely Not Able 25,000 5,000 5,000 35,000
TOTAL: 280,000 130,000 210,000 620,000

Source: Survey by Bond Brand Loyalty for CAAMP; analysis by the author.
The results of the survey suggest the an increase in the minimum required down payment from 5% would have drastic consequences for the housing market and would negatively impact the broader economy.


 
To be continued...

 
If you have any questions on downpayments please call us 250 862 1806 or email [email protected].


Income from home equity

When retirement funds run low, seniors often ask if tapping into the equity in their home is the right way to retain financial independence. To see if this option might be a good fit for you, consider if you agree with the following statements:
 
  • Staying in my home is critical to the quality of my retirement lifestyle.
  • The idea of renting instead of owning a home bothers me.
  • My income consistently falls short of ongoing expenses.
  • I expect my retirement savings to run out within the next few years.
  • I am comfortable with using the value of my house to fund retirement.
     
If you answered mostly ‘yes’, take a look at a few more details about a reverse mortgage called the CHIP Home Income Plan from HomEquity Bank:

If you have reached age 55, you may be eligible for CHIP.  It lets you convert up to 50 per cent of the equity in your home into tax-free cash.
 
Unlike other loans on the market, there are no credit or income qualifications and you are not required to service the interest, or repay the principal until you choose to move or sell.
 
It is also guaranteed that you will never have to repay more than the fair market value of the house at the time of the sale.
 
When polled by the Brondesbury Group this year, 78 per cent of existing CHIP customers said they would recommend a reverse mortgage to others as a cash-flow solution. Financial advisors and mortgage brokers have details and more information is also available online at www.chip.ca.
 
If you have any questions regarding the CHIP program or would like to take out a CHIP mortgage please call us at (250) 862-1806 or email at [email protected].


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Increase property value

Here are five of the best renovations you can do to your home to increase property value. These five renovations can sometimes have a return on investment five to six times what they cost.

#5 Flooring

Flooring is one of the most important aspects of your house. You will see an immediate rise in property valuation with the installation of hardwood floors. Existing hardwood floors that you can refinish are ideal as they are less costly to restore and in higher demand than new flooring materials. For the bathroom, tile will always be in demand and retain value exceptionally well.

#4 Fixtures

Kitchens often look tired and dated, in large part due to old fixtures. Replacing or updating cabinet hardware, light fixtures, countertops and faucets will result in an immediate increase in your home’s value. This small, but effective upgrade will also revitalize the entire home. Pot lights are in high demand in open concept style homes.

#3 Bathroom

The bathroom is the second most important room in the home in terms of valuation. If you can add a three-piece bathroom to a home with only one full bathroom, you will see a dramatic rise in the market value of your home. While you should never compromise bedroom space for a bathroom, try sneaking one in dead space in the home. Scott managed to fit in a three piece bathroom under a staircase – the width of the room measured just 44 inches. As an added tip, use glass for the shower to make the bathroom feel more spacious.

#2 Kitchen

Kitchens are the single most important room in the home relating to valuation. The kitchen can make a significant difference in the value of your home. As such, it is crucial that you invest in having a modern, fresh and desirable kitchen. Modern cabinetry, under cabinet lighting and new appliances will all significantly increase the value of your home on the market. To save on cost without compromising construction and desirability, look at options like Ikea cabinets as opposed to custom cabinetry.

#1 An Income Suite

No surprise, but the single biggest way to increase the value of your home is to build an income suite within the property. Whether this is converting your basement into a rental, or another floor in the home, an income property will increase your home’s worth. The main reason for this is that it covers a portion, or sometimes all of your mortgage payments, and results in your home being cash flow positive – which creates real wealth that can supplement your income.

If you would like to talk to us about refinacing your home to take advantage of these value enhancing improvements please call (250) 862 1806 or email [email protected].



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About the author...

Laurie Baird is a Mortgage Broker with Verico Complete Mortgage Services. She has been in the mortgage business for 17 years starting as a lender with Royal Trust. She later worked at the Royal Bank as a Mortgage Consultant and 11 years ago became a Mortgage Broker. As a Mortgage Broker she is able to match her clients' needs with a lender who will provide them with competitive rates and products. Laurie has a Bachelor of Education degree from UBC.

Contact her at 250-862-1806 or by fax 712-0209 or visit:
http://www.okanaganmortgages.com/

Visit Laurie's blog at: http://www.okanaganmortgages.com/blog.html







The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.


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