Reverse mortgages are taking off again in Canada. This growth is due in part to a combination of an aging baby boomer population, rising real estate values, and the rising cost of living. Mortgage lenders are taking note. Many new products are coming to the market, creating competition that is good for consumers. All of this is making reverse mortgages the fastest growing mortgage market segment.
Reverse mortgages are misunderstood
Unfortunately, reverse mortgages have a PR problem. They have been around for decades. In places like the US and the UK where the product was pioneered the terms of the loan were less than desirable. Exorbitant fees and high-interest rates gave them a terrible reputation. They were commonly viewed as a loan of desperation and last resort.
Educating consumers on new reverse mortgage products
But not all reverse mortgage products are built the same. Thousands of Canadians are finding out it can be a very practical and useful tool to compliment your retirement financial plan. Benefits of reverse mortgages include:
You receive the money tax-free. It is not added to your taxable income so it doesn’t affect Old Age Security (OAS) or Guaranteed Income Supplement (GIS) government benefits you may receive.
You can use the money any way you wish. Maybe you want to enjoy your retirement or cover unexpected expenses. Perhaps you want to update your home or help your family without depleting your current savings. The only condition is that any outstanding loans (e.g. existing mortgage or home equity line of credit) secured by your home must be paid out with the proceeds from your reverse mortgage.
No regular mortgage payments are required while you or your spouse live in your home. The full amount only becomes due when you and your spouse no longer live in the home
You maintain ownership and control of your home. You will never be asked to move or sell to repay your reverse mortgage. All that’s required is that you maintain your property and stay up-to-date with property taxes, fire insurance, and condominium or maintenance fees while you live there.
You keep all the equity remaining in your home. In many years of experience, 99 out of 100 homeowners have money left over when their reverse mortgage is repaid. And on average, the amount left over is 50% of the value of the home when it is sold.
Introducing the Canadian Home Income Plan (CHIP) from Home Equity Bank
Canadian Home Income Plan from Home Equity Bank is the first all Canadian reverse mortgage product. It’s been around for 30 years and they are Canadian Association of Retired Persons (CARP) approved. CHIP has innovated and evolved reverse mortgages to make it a useful and cost-effective tool to help Canadians over 55. You can learn more about CHIP on the Home Equity Bank website here.
Join me in conversation with CHIP Home Equity Bank
In this video, I sit down with Krista Zingel from Home Equity Bank. Krista is the GTA business development manager for CHIP and supports me as a CHIP advisor. In this interview, we discuss some of the highlights of reverse mortgages. We talk more about why reverse mortgages are growing and become more accepted as well as some of the myths about reverse mortgages.
Tridac Mortgage your certified CHIP Advisor
Reverse mortgages have always been close to us here at Tridac Mortgage.
In fact, my Dad started work in the 90s to build a business around Reverse Mortgages and actually secured the name and corporation. Reverse Mortgage Corporation Canada. But he was ahead of his time. It would take another two decades for the market conditions to be just right for the growth he anticipated in the reverse mortgage market.
As the second-generation owner of Tridac Mortgage, I’ve picked up where my father left off. We’ve made reverse mortgages a focus and cornerstone of our business. If you or someone you know might benefit from a chat about reverse mortgages please don’t hesitate to put them in touch with me. You can book a call into my calendar below or get in touch with me here.
