Retirees

Get Your Cash, Have Zero Payments and get to keep your house to?

What am I talking about?

I’m talking about the new REVERSE MORTGAGE.

First of all, let me explain what has been happening up until now so you can identify the changes.

Previously, many lenders offered what was called an equity program.  This was a product offer the Banks and Investors in common where they would lend their money simply based on how much equity was in the property.

In other words, the Borrower did not have to prove their income (with documentation) and their ability to repay because there was more than enough equity to cover any default.

Today almost all lenders have exiled this program.  However we believe it will be making a reappearance back into the market soon.

So who would use opt for this mortgage product?

Well it would be entrepreneurs, who say, write off a lot of their income. Real estate investors (for the same reason.  Property developers and builders alike that are over leveraged and wouldn’t qualify under transitional means but have plenty of equity over multiple properties… and the list goes on.

But the most typical borrower profile who would use the equity program is the senior community who is on a low fixed income in an ever inflating environment.

In White Rock alone, 29.4% of residents are over 65 years old (taken from 2011 census) yet the Fraser Valley Real Estate Board reported that the average sale price of home in December 2014 was $1,050,945!

FVREB reports the average sale price in South Surrey/White Rock for detached Houses.

FVREB reports the average sale price in South Surrey/White Rock for detached Houses.

 

These equity programs were therefore heavily relied on by the retired community to access their equity, maintain their quality of life and stay longer in those very same homes!

What’s happened now in Federal Lending Guidelines is that documentation has now become vital to any loan transaction.

Lenders are not so much unwilling as they are simply not allowed to qualify a client like they were before. Using basement suite income, income from registered retirement savings, CPP and/or OAS is becoming a real challenge. 

This leaves many seniors looking to alternative lenders or, on occasion, private lenders for financing.

If you didn’t know, alternative & private financing is expensive money ranging between 5.25% – 14% interest and should only be used as a short term plan (not for your entire retirement!).

So I will say this …YES YES YES there is a place for B & alternative and private loans but it is NOT for retirees.

A much better option for them is a Reverse Mortgage.

Now let me be very clear here.  If you can qualify for mortgage financing with verifiable  income, that is the better route.   The proof is in the math when comparing conventional mortgage to a reverse mortgage.  Likely, you will always come out ahead with the conventional mortgage  But…if you don’t qualify for it,  a reverse mortgage may give you the money you need with peace of mind.

Let’s Talk about the features with the “New” Reverse Mortgage products:

  •   Up to 50% Loan to Value –  The Reverse mortgage allows you to access up to 50% of the properties without qualify for it.   That’s showing no income and no minimum credit score! (Must be 55 years +)

 

  • Reasonable Interest rates –  One particular lender is offering a variable mortgage at Prime + 1.75% or a 4.99% fixed term mortgage.  Granted these can change at a moment’s notice they are significantly lower than private lending rates and quite manageable.

 

  • Utilization Flexibility– You can elect to have a one time lump sum advance or a monthly deposit for living expenses… or both!

 

  • Zero Payments– You do not have to make any payments while you or your spouse are occupying the home.  So you can maintain ownership and control of your home while enjoying all the benefits of having converted some of your home’s value into cash.  Of course you still have the opportunity to make interest payments which is only going to preserve more of your equity.

And best of all….

  • It’s tax free! – Because this is a loan, the equity that you take out is actually tax free!

 

So you see, a reverse mortgage is not that scary.

If you are considering this option, we encourage you to talk to us about your needs.