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Mortgage Broker News | 01 Apr 2014, 09:42 AM Agree 0
They are becoming more popular but brokers are divided on whether reverse mortgages are the best option for aging clients looking to take advantage of equity in their homes.
  • Angela Wong-Liao - Invis Inc | 01 Apr 2014, 11:43 AM Agree 0
    As a baby boomer, I am exploring "Reverse Mortgage" option for some of my older clients who are house rich but cash poor. "Reverse Mortgage" is not for everybody and it is depending on the need of the potential applicants. Equity Bank is registered as one of the schedule 1 bank in 2008 (it was formerly CHIP). The maximum LTV is 50% but clients can put on a second behind up to LTV 65% with the bank's approval. Equity Bank advertised for homeowners over 55 but I believe it is more likely for homeowners over 65. The bank offers both fixed term and variable rate mortgage product, applicants can draw down monthly to supplement their pension income or lump sum for home care services, investments or helping their children. The estimated cost for setting up is $1,495 + HST if applicants do not have mortgage lien on property. One of the attractive feature of "reverse mortgage" is that the applicants do not required any income or credit rating qualification. I have changed my opinion of "reverse mortgage" after I did a detail analysis of the product. I believe it can add value to older applicants who may not be able to qualify with a regular lender but have lots of equity in their own homes.
  • Omer Quenneville | 01 Apr 2014, 08:19 PM Agree 0
    While the reverse mortgage is an option it is an option that should only be considered after all other options have been rulled out or absolutely no other option is available.
  • Gord McCallum | 10 Apr 2014, 07:15 PM Agree 0
    Like anything, a reverse mortgage is a tool in the toolbox that can be used for good or evil.

    I think HomEquity Bank does a good job of ensuring proper legal consultation is in place for people exploring this option. There are reasonable underwriting policies in place to limit risk to the bank, and guarantees in place that limit risk to the borrower.

    We've referred a lot of these over the years and we've seen many positive stories where the client was really well served by a reverse mortgage and it truly was their best (and sometimes only) option. Glad to have it available to us and our clients.
  • Daniel McKay | 11 Apr 2014, 06:25 PM Agree 0
    I'm in agreement with Gord & Angela. Reverse mortgages fill an important lending void in the niche market for the 55yr+ Canadians looking to access some of the equity in their home. All too often, a reverse mortgage is the only option as I believe the lending industry for the most part is discriminating against this demographic with cookie cutter underwriting practices regarding GDS/TDS & retirement income. 35/42 debt servicing limits certainly make sense when applied to the demographic (25-45 year olds) they were designed around. Borrowers in this age group certainly take on significant levels of consumer debt, have or will have dependants, spend a higher proportion of their income on entertainment & toys, should be devoting a portion of their income to savings etc. But how many of these factors truly apply to most 55+ year olds? I once had an underwriter tell me "We can't accept annuity income, because their is no guaranty that it is permanent." my response was "You might want to research what an annuity is, because it actually is guaranteed income to the annuitant until their death." Only one of the big 6 Banks has a true equity/net worth program that I'm aware of that can finance these types of borrowers, and the monolines and the insurers won't touch them. I recently got 2 declines prior to an approval on a 17%ltv, 54% TDS for a gentleman that fits into the 55-65 age group. I bet most of you reading this saw the 54% TDS, and jumped to the conclusion that this borrower should not qualify for financing, while completely overlooking the fact that at 17% ltv, how much risk could possibly exist in financing this borrower? Say what you want about reverse mortgages, but until the rest of the lending industry develops some appropriate lending guidelines for this ever growing borrower segment, they are a good, and all too often the only option.
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