As more Canadians facing looming retirement with less savings, reverse mortgages are becoming an option more and more of them are choosing.
A recent article in the Globe and Mail laid out the issue, saying that the less people prepare for retirement the more you’re going to hear about reverse mortgages.
“Seniors today are living longer, they’re spending more and they’ve saved less,” Greg Bandler, senior vice-resident of sales and marketing at HomEquity Bank, told the newspaper. “They also have so much of their net worth tied up in their home, a very illiquid asset. We’re all about helping them unlock that asset and provide some liquidity so they can have some cash flow and do the kind of things they want to do.”
Broker-recommended business is an increasingly important contributor to that solid bottom line, according to Bandler when speaking to MortgageBrokerNews recently. Growth in those client referrals once again outpaced those of Bandler’s other key referral partners, including banks and investment advisors. It’s a trend that has developed over the last three years, said Bandler, and was only broken in the second quarter when another referral partner edged ahead. Q3 saw brokers once again assume the lead.
“Brokers in the current market conditions are looking for ways to stabilize their revenue and as a result, I think, we’ve been having great support from the broker channel that is pacing higher than the aggregate,” Bandler told MortgageBrokerNews.ca. “It’s also a result of efforts to build a strong working relationship with brokers and to educate them about the product.”
With Canadian housing prices levelling off and perhaps set to fall in coming years, some wonder if reverse mortgages make sense – with the possibility that borrowers would sell their homes for less than they’re worth. Bandler, however reminded Globe readers, that won’t happen: If you sell for less than you owe, HomEquity Bank eats the difference.
HomEquity doesn’t leave this to chance, though. The younger you are when you apply for a reverse mortgage, the less equity you can take out. If you sign up at the minimum age of 55, Mr. Bandler said you would be capped at 20 to 25 per cent of the equity in your home. “We’re very conservative lenders,” he said. “That conservative approach is baked into our model.”
The article also revealed some facts about reverse mortgage borrowers, including that the average age of applicants is 72, the average amount of home equity borrowed is 36 per cent, the average length of time people stay in their homes is 12 years and the average amount of home equity left after a home is sold and the reverse mortgage is paid off is 50 per cent.