A veteran Vancouver broker has tapped into the growing number of baby boomers willing to sell their houses and take out high-ratio mortgages on retirement homes in order to limit exposure to the volatile property market.
“It’s a new segment for brokers – working with baby boomers who have been presented a new option by Vancouver’s current real estate market,” Morris Briglio, president and senior mortgage consultant with The Mortgage Advantage, told MortgageBrokerNews.ca. “Essentially, with money being so cheap, empty-nesters are finding it makes sense for them to take out a mortgage for their retirement home, and not go the traditional route of using the money from the sale of their family homes to buy that retirement home outright. It becomes a double-win, because they are then able to put the money from the sale into other high-yield investments and yet they’re still gaining equity in their new homes because of the value growth in the Vancouver area.”
The industry veteran is among the first to hit on the potential growth area for brokers, now grappling with a slowing real estate market but looking for something outside of refi work to sustain them. Arranging mortgages for retirement-age clients is a relatively new phenomenon, with Briglio growing that end of his portfolio by 25 per cent since late 2009, and the fall of interest rates.
Those baby-boomer clients are capitalizing on the record-high values attached to their Vancouver-area homes, but instead of taking most of those equity gains and funnelling them back into another, smaller home, they’re taking most of the money outside of the property market and putting it into investments making eight to nine per cent annualized returns, said Briglio. Those A clients are finding it relatively easy, largely based on pension and investment income, to win high-ratio mortgages with monoline lenders and the banks. Amortizations as long as 25 and 30 years are also part of the equation.
“The luxury here is that even with a high-ratio mortgage and longer amortizations, many of those clients are going to be making equity gains on that retirement home,” said Briglio. “That’s in addition to the return on their investments from dividend funds and other investments they’re making through investment advisors. It’s one strategy.”
The lynchpin for that plan is unprecedented price escalation on the Lower Mainland, which despite predictions for a housing bubble, continue to defy even the most-optimistic projections.
Last week, CREA reported that the average Vancouver home price had shot up 25.7 percent in May from the year-ago period, even as sales volumes slackened. The growth is driven by foreign buyers, most from Mainland China. That interest isn’t expected to wane anytime soon.
“I think that because of the position of Vancouver to Asia and its historical ties this market, prices may go up and down slightly, but our market will maintain its attraction for those buyers,” Wayne Mah, a broker with The Mortgage Centre - City Wide, told MortgageBrokerNews.ca.
That’s likely good news for Briglio and other mortgage professionals looking to baby boomers to expand their bottom lines.