Technology is already playing a huge role in the mortgage industry. In the past, mortgage applications had to be physically taken by hand and faxed in (what’s fax anyways?!)… It may soon by possible, with technology’s help, for borrowers to be able to fill out their own application and send it, along with all supporting documentation, straight to lenders without a mortgage professional’s help – kind of scary.

On the Realtor side, there is DocuSign, Realtor.ca, Zillow, and a host of other technology driven solutions that help Realtors be more efficient in their business. However, just like in mortgages, it’s coming to a point where buyers and sellers may see value in going to discount brokerages such as Redfin.

Let’s first look at the mortgage side.

Quicken Loans’ Rocket Mortgage in the States started out as an online-only mortgage application tool. The promise is faster service, with little headache, and everything done “from the comfort of your own home.”

In Canada, Scotiabank just rolled out their eHOME Mortgage application. RBC has had a Pre-Qualification Application for a year and TD rolled out their Digital Mortgage Application in early 2019.

Our own parent mortgage company, Dominion Lending Centres, brought out their “My Mortgage Toolbox” application for Mortgage Brokers to use, and other Broker houses are fast on the trail. All lenders are trying to capitalize on a Millennial’s and Generation Z’s comfort level with providing their personal information to a computer system.

The promise with all of these digital tools is to make a borrower’s mortgage journey easier, and with how technology is progressing, this digital experience is going to keep getting better and better.

Unfortunately, as with any process change, problems arise…

The first and most glaring issue with the digital mortgage experience is that because mortgages are complex, with timelines to follow and anxiety to manage, borrowers are continually requesting human interaction to answer their questions. Rocket Mortgage’s own website now advertises being able to chat online with a specialist right up front.

Secondly, although digital applications promise speed and ease of use, all mortgage files still have to have “eyes” on an application. We’re not there yet (nor will we be for the foreseeable future) where humans do not have to touch mortgage applications for final approval. This human requirement means that a mortgage file must wait in queue to be approved.

Lastly, if any file has the slightest hiccough and doesn’t conform to exactly what the computer systems need to see, an expert will have to be called in during the process to troubleshoot. As an aside, the “experts” who look at these files are salaried individuals; more on that later.

All-in-all, technology alone is not changing the mortgage market.

On the Realtor side, the biggest issue with using Redfin, or relying too much on technology driven companies, is that the Realtors who work there are most likely going to be sub-par… Yeah, I said it… Just like 1% and 2% Realty, if someone is working for half the commission, they are, by nature, not going to be as good or competent as someone who prides themselves on working for their due.

Additionally, I firmly believe that in life, we get what we pay for. The best advisers and salespeople will gravitate to where they are better compensated. Salaried individuals and discount mortgage and real estate professionals will invariably move to become independent if they are any good. If they are just so-so, bad at their jobs, or are just happy to provide the bare minimum in service, they stay and let someone else hunt for business – see the “more sinister” reason for technology and apps below.

Technology as a Benefit:
There are ways that technology is being used for the benefit of borrowers.

The first is that in our hyper connected world, a borrower’s credit, income, and down payment can all be verified at the touch of a button. Mortgage Brokers can already pull someone’s credit bureau in seconds, and there are also services to allow us to get 3-months of bank statements for down payment verification with a client’s permission. The last step is to have our systems validate income by way of a national employer registry or by other means. In the States, this is done through their IRS and the credit bureau companies and it will come to Canada in the future. All of this means that a borrower can get firm approvals more efficiently (not having to download bank statements, get employment letters, etc.) and it will allow the professionals more time to provide advice and cater to the client’s needs.

The second benefit to borrowers is that the new applications are now able to receive documentation, communicate on application status in real time, and much more, all in one easy-to-use platform. It’s incumbent on the professional to make sure that their technologies and systems are properly integrated to provide a seamless, but better, mortgage experience for their clients.

To recap, technology will be playing a larger and larger role in how mortgages are obtained in the years to come, and in order to thrive in the 2020s, Mortgage Brokers and Realtors are going to have to use technology to the best of their abilities. The marriage between human interaction (building rapport) and providing a seamless experience through leveraging technology should dominate our thinking!

Courtesy of Eitan Pinsky – AMP – DLC Origin Mortgages based in Vancouver, BC

We have seen a return of the buyers’ market and many people are asking, how long will this last? While some renters without a down payment might be asking, how can o put a plan in place to own?

With the cost of living so high, and student debts coming out of school, many consumers question how they’re going to come up with a down payment for a home.

Here are some ways you can get it done.

Decide how much you can save and pick a plan that works for you: a) A 36-month plan saving $700/month will get you $25,200 (you will need about $2,000 for closing costs if you qualify as a first-time homebuyer) b) A 24-month plan savings $600/month for $14,400
Get a gift from a family member
Borrow the down payment, or a portion (which may also help with credit building)
A combination of all of the above
For those of you that want to partner with government for down payment and profit of home ownership, a new government program can be a helpful tool provided it stays past the October election. https://www.cmhc-schl.gc.ca/en/nhs/shared-equity-mortgage-provider-fund

You might me reading this and thinking, ‘yeah right, that is not reality.’ Or for some people, you know it might just be exactly what will help them move forward.

Perhaps you have graduated from school and your parents don’t charge you rent. Imagine if you could put one of your paycheques every month aside and try living within those means and budgeting accordingly.

Or say you have a partner and one of you just started work in a specific trade and the other’s paycheque went towards the “home purchase plan.”

Also, if you are within the qualifications to buy, you will be earning a combined household income of $125,000-plus per year, so taking those funds right from your paycheque into your RRSP will have additional tax benefits too where you can use the refund for closing costs or amp up your down payment.

Here’s an example of how this worked for a lab technician and chef with a two-year old daughter.

They did a combination plan as they moved up to Canada from the U.S. two years ago, both got stable jobs and had no outside debt. They were paying $1700 a month rent. They used a $10,000 line of credit they took to put into investment to help establish Canadian credit. After getting the line of credit and placing it into a safe investment, they:

Set up an RRSP and placed $600 a month on the loan and $700 a month into their RRSP.
Now this family is used to having a cash outlay of $3,000 per month which will be the actual expectation they have for when they buy a home.
With this plan, they take a mortgage for a test drive, save money on taxes, establish a great credit score and worked away toward their goal.
Are there holes in the plan? Yes, home prices may go up, there was interest on the loan they paid and they may have to adjust or modify their plan. Their employment can change, however, this practice will only benefit them no matter what life brings their way and there is a sense of empowerment when you have a plan and can see how you can get there.

Do you or someone you care about want to know how they can be set up with a multifaceted plan to help them move forward with a goal of owning a home?

Courtesy of Angela Calla – AMP – DLC Angela Calla Mortgage Team based in Port Coquitlam, BC

In the past, we had banks (bank as a catch all for credit unions and trust companies) and Mortgage Brokers.

Writing mortgage applications is extremely difficult; there are a lot of moving parts in a mortgage. Because of this, banks employ mortgage specialists whose sole role is to provide mortgage advice.

On the other hand, previous to 20 years ago, a Mortgage Broker’s main job was to get financing when a bank declined a borrower’s application. Basically, Mortgage Brokers were a borrower’s last resort: “if you can’t get financing from the bank (RBC, TD, Scotia, etc.), come speak to me.” This is generally why we see older generations having never used mortgage brokers – they didn’t have a need.

But, there have been many changes over the decades. In most cases, Mortgage Brokers can provide better interest rates for most mortgage applications. This is specifically due to wholesale lenders.

But, when it comes to prime (bank or Monoline Lenders) financing, Mortgage Brokers find they are sometimes at a disadvantage when banks make “exceptions” to regulatory mortgage rules. Mortgage Brokers are sometimes held to a higher standard because all of our files are picked at with a fine-toothed comb.

For example: in 2016/7 CIBC, which does not procure mortgages from Mortgage Brokers, underwent a mortgage audit. The regulator found that every single one of the 50 mortgages audited failed their audit… and CIBC hardly even got a slap on the wrist. As an side, remember when banks would provide financing for foreign students with no income? Yeah… that was primarily CIBC!

Notwithstanding, Mortgage Brokers (by definition) have access to many different types of lenders and are not beholden to the employer institution. Non-prime lenders can lean more heavily on a specific property and less so on the strict guidelines that the government requires.

Long story short, Mortgages Brokers have access to many different lenders, but in come cases, a bank specialist can get something done that a Mortgage Broker cannot do due to the bending mortgage rules. Notwithstanding, in 99% of cases, if all rules are followed (which are being more strictly enforced since 2018), Mortgage Brokers have more access and more complete solutions to bank specialists.

Courtesy of Eitan Pinsky – AMP – DLC Origin Mortgages based in Vancouver, BC

Back in the late 80’s, the Japanese housing market came to a grinding halt. Homes were no longer affordable for your average Japanese consumer. The government came to the rescue with a novel idea: 99 year mortgages. You could buy a house, pay lower more affordable payments, your son or daughter would take over and pay the mortgage down and finally your grandchild at some time close to retirement age would finally pay off your mortgage.

Who would want to do this? This was a short term solution. In 2007, we had 40-year amortized mortgages which allowed a great number of people to buy homes who normally would have continued to rent. This created a housing boom, but it made the banks nervous and terms were cut back to 35 years, then 30 and finally back to where they were in 2005 at 25 years. While longer amortizations mean lower monthly payments, the flip side is that you end up paying a lot more interest over time.

Mortgage professionals use amortization as a tool to help their clients at various stages in their lives. Often we use the maximum 25 years to help people get into their first homes. The idea is to get them into home ownership regardless of the cost. Later when they renew we often suggest a shorter amortization if it’s possible.
For example, after paying down a mortgage for 5 years, a couple with a $300,000 mortgage renewing today would be offered a 20-year amortized mortgage with monthly payments of $1659. In 5 years the couple will have paid $40,356 in interest $59,214 in principal and have a balance of $240,785 left on the mortgage.
If the amortization was shortened to 17 years the payment would go up to $1,874.95, an increase of $215.95. but at the end of 5 years they would have paid $39,365 in interest, $73,131 in principal and have a balance of $226,868.11. In addition, they would now only have 12 years instead of 13 years on their mortgage.

Now, if they are at a stage in life where their twins are going to be going to university or if they need to build a granny suite for aging parents, they may need to lower monthly payments in order to pay for renovations. If they have 20% equity in their home, they could extend their amortization to 30 or even 35 years with some lenders.
Now their monthly payment drops to $1,260 with a 30 year amortization.
And it drops to $1,149 with a 35 year amortization.

Amortization is only one tool that your Dominion Lending Centres mortgage professional can use to save you interest, help you to pay off your mortgage quicker or to lower your mortgage payments. Be sure to call and ask them for help.

Courtesy of David Cooke – AMP – DLC Jencor Mortgages in Calgary, AB.

A recent article in the Huffington Post addressed the pricing strategy for the Big Six Banks, BMO, CIBC, National Bank, RBC, Scotia and TD and who really sets interest rates. RBC announcing a rate drop in January and the other banks soon followed. For consumers the banks are seen as leaders of the pack and everyone waits to see what else they will do. The reality is the bank rates were higher than the market for some time.

The Huffington article states “Canadians pay attention to the big guys, however, because they’re either too comfortable to make a change or simply not aware they’re being taken for a ride. The banks have a 90-per-cent stranglehold on the Canadian mortgage market and we’ve been slow to start paying attention to the alternative — often cheaper — options out there.”

The drop in rates was a measure to bring bank rates in line with the non-bank lenders who have already been offering lower pricing. The only difference is the banks have high market share of the business and more profit each year so they can afford to spend money on media and other forms of advertising. The media attention helps them to capture more business with a rate drop after a lag time of passing on higher rates to consumers. The informed consumer working with an independent mortgage broker will already know the market and what mortgage product is best for their needs.

However, interest rates are not the only consideration when choosing a mortgage. Each time you make a purchase, renew your mortgage or take equity out to renovate, invest or other reasons, it is always best to consult with your mortgage broker for a review.

One of the big factors is the cost to exit that mortgage before maturity. Life happens. There are costs to breaking the contract early in the event of sale, marital break-up, death or need to consolidate other debts. Bank penalties for early payout are higher than non-bank penalties by a factor of 4 times. By reviewing your needs with your Dominion Lending Centres mortgage broker, we can discuss all of the options available from lenders including bank and non-bank, to ensure you are making an informed decision.

Courtesy of Pauline Tonkin – AMP – DLC Innovative Mortgage Solutions based in Coquitlam, BC

Picture this: You’ve finally been able to put away enough for a down-payment on your dream home. It’s taken you five years of diligent saving, but you did it! You have also been diligently working on improving your credit score and paying off debts and are at a place of financial stability. So, first of all, KUDOS TO YOU! Second…now what do you do? Here are the three steps that will take you from browsing new homes to getting the keys to your new place.

STEP 1: PRE-APPROVAL
This should actually be the step BEFORE house hunting. Visiting your mortgage broker to get pre-approved is the first step anyone looking to buy a home should do. When you meet with your broker for the first time they will:
• Have you fill out an application (or you might be able to fill out one online)
• Pull your credit
• Determine what your maximum purchase price will be.

Be aware that you will also be asked for additional information when you visit your broker to apply, including a letter of employment/pay stub, down payment verification, two years notice of assessment and/or T4’s, a void cheque, and a number of other potential documents.
Once you are pre-approved it’s house hunting time for you! The benefit of having this done BEFORE you start looking is that you can work with your realtor to find properties within that price range.
When you do find just the right home for you, it’s on to step two.

STEP 2: APPROVAL
If you were able to provide the bulk of the paperwork for your pre-approval, then it will be smooth sailing from here. You may have to supply a few pieces of updated information but otherwise, it’s up to the lender to do the hard work at this point.
Your application will be re-assessed, and the lender will take a look at the property you are purchasing. Once they confirm that it aligns with the guidelines they have laid out for your loan, then it is sent off to the mortgage default insurer for approval. At this point, make sure that you do not remove the financing condition until all the lender conditions are met.
Now that you have final sign-off and are waiting for the final conditions to be met, it’s on to step three.

STEP 3: FINAL STEPS
Your broker will notify you once the conditions have all been met, and the lender will send the paperwork over to the Lawyer’s office. The lawyer will take a few days to go through the mortgage and prepare it for your final sign off. When you go, you will be asked to present:
• Void Cheque
• Two forms of identification
• Balance of the down payment in the form of a bank draft

On the day of funding, the lender will send the funds to the lawyer who sends them to the seller’s lawyer who upon receiving the funds will give you the all clear.
All that’s left is to hand you the keys to your new home!
As one final step, keep asking questions at each stage of the mortgage process. You should check in with your Dominion Lending Centres mortgage broker if you have any questions along the way. They are happy to guide you through the process of not only getting a mortgage but also having a mortgage too!

Courtesy of Geoff Lee – AMP – DLC GLM Mortgage Group based in Vancouver, BC.

The following is a summary of the choices available for clients when looking at the four different types of lending groups.

So what exactly is a lender? By simple definition, a mortgage lender provides financing for a real estate purchase hence the word lend.

Which lender is best for you will all depend on who you are as a borrower, what your current situation is and what your situation will look like in the future.

Big Banks

Currently, mortgage brokers have access to TD Canada Trust and Scotiabank. Big banks are especially appealing to first-time home buyers as it offers a sense of comfort knowing your mortgage is being dealt with a nationally recognized financial institution.

TD offers very fast review of documents with the ability for collateral charges, multiple branch locations and competitive privileges such as pre-payment abilities.

Scotiabank is also an advantageous option for homeowners as they have one of the most comprehensive and easy-to-use home equity lines of credit, referred to as their Scotia-Step.

Being able to access a Home Equity Line Of Credit (HELOC) and roll it into your mortgage offers simplicity and efficient methods of borrowing for homeowners. The drawback with both banks is that they are chartered banks. When a client decides to use them for fixed rate mortgages, specifically the 5-year terms, they can potentially be on the hook for penalties north of $10,000 due to breaking their mortgage early. Career changes, moving from different neighbourhoods or cities, upgrading or downgrading home sizes, marital issues – these are all reasons why someone may need to break their mortgage early. Being in a long term fixed rate mortgage with a chartered bank can be unpleasant.

Credit Unions

One of the biggest benefits of credit unions such as Westminster Savings or Coast Capital is that they are not federally regulated, they are provincially regulated. They are not required to adopt federal mortgage rule changes unless they want to. This can be an extreme benefit to those considering rental properties, those with unique income/employment situations or complex transactions that chartered banks do not or cannot work with.

Some of the negative attributes are, however, a reputation for slow review times of documents and mortgage applications, as well as portability. If you work for a company or in an industry that is known for relocation and re-assignment across provinces, you will pay a penalty to a credit union every time. This is something that is likely not to happen when working with charted banks or monoline lenders as they will have more flexibility in allowing you to port your mortgage to a new property in other provinces.

Monoline Lenders

Monoline Lenders are supported by mortgage brokers, and in turn, mortgage brokers are supported by monoline lenders. You cannot access mortgage products that a monoline lender offers without using a broker as they typically do not have physical branches or locations. They are funded by private investors dealing only in mortgage transactions, allowing their products to be more customized based on the investors’ risk tolerance. The benefits? – Extremely low-interest rates, very competitive privileges with pre-payment and portability, fast turnaround-times, and the best part, significantly lower penalties for breaking a mortgage.

With a big bank, a $10,000 penalty for breaking mortgage early may only cost you $3,000 with a monoline lender. This is highly advantageous to someone who wants the security of a long term fixed rate but isn’t 100% certain they will be carrying out their mortgage at that property for the full five years. The disadvantage is the almost blind trust a client must have. These monoline lenders do not have much brand recognition with the public, limited direct access with clients and usually do not have any physical locations to visit. This makes it hard for some people to feel comfortable using them as their mortgage provider.

Private Lenders

The benefit of a private lender is that anyone who has inconsistent income, unique properties, poor credit history or any type of severe risk in their application can get an approval. When a chartered bank says no, a credit union says no and a monoline lender says no, a private lender can say yes. The disadvantage? – your interest rate is going to be significantly higher and the privileges such as prepayment and portability are going to be significantly less. As well, with most lenders, they will pay the mortgage brokers commission themselves. In this case, you the borrower will be paying a fee to the broker.

This information is extremely powerful to you as a homebuyer and even as a current homeowner.

Courtesy of Chris Cabel – AMP – DLC HomeHow Mortgage based in Calgary, AB

If you want to buy a home and don’t have a bucket load of cash – you are going to need a mortgage.

In order to get a mortgage, you are going to need credit…

When you get a mortgage, banks lend you “their” money and secure the loan against the property you are buying. Therefore they want to know how you’ve handled credit in the past.

Bad credit = high interest rates
Really bad credit = NO mortgage
If you have bad credit, you need to improve your credit to get a mortgage/better interest rates.

When you have had credit challenges – you are going to be limited with the number of credit card companies willing to offer you credit.

In order to buy something on credit, most lenders follow the Rule of 2:

2 lines of credit (credit card, line of credit, loan etc.)
Minimum credit limit $2000
2+ years (24+ months) history
One of the quickest ways to rebuild your credit is to get 2 credit cards.

Since you’ve had credit blemishes in the past, many credit card companies aren’t interested in giving you more credit.

If you have had any files that have gone to collections, you MUST pay those off ASAP.
One way to get a credit card for the credit challenged, is to get a secured credit card.

DEFINITION of Secured Credit Card

A secured credit card is a credit card that requires a security deposit. Secured credit cards are generally for individuals whose credit is damaged or who have no credit history at all.
A secured credit card works just like a traditional credit card. A secured credit card can help you establish or rebuild your credit.
The security deposit will depend on your previous credit history and the amount deposited in the account.
Security deposits for secured credit cards tend to range between 50% and 100%.
The security deposit cannot be used to pay off the balance on the credit card.
Typically, secured credit card companies will increase the limit on your card once you have proved you are a good credit risk. This takes time. With continued good credit history over a few years, they will refund your security deposit and issue you a regular credit card.
Five Tips for Wisely Using a Secured Credit Card

Use for small purchases you can pay off each month.
The point of using a secured credit card is to show your ability to responsibly charge and then pay off your balance. To do this, make a few purchases each month and pay your bill in full. By NOT carrying a balance you avoid paying interest & build your credit.

Pay on time, and more than the minimum payment.
To get a healthy credit score – it is essential that you pay on time. Ideally you want to pay off your balance in full. If you can’t pay the full amount, pay down as much as you can, so you are reducing your credit utilization (the amount you owe compared to your credit limit).

Make Multiple Payments every month.
Making more than one monthly payment can help keep your balance low. A large balance reduces your overall credit which can negatively affect your credit score. If you make a large purchase, pay it off quickly to keep your credit utilization low.

Set Payment Alerts.
Even the most organized person misses a payment now and then… That’s OK for people with good credit… if you have credit blemishes you’ve lost your “get out of jail free” privilege. One missed payment is one time too many! Set up payment reminders 1 week before your payment is due.

Enroll in Autopay.
If you are concerned about making your payments on time? The easiest plan is to enroll in autopay, which allows your credit issuer to automatically deduct the monthly balance form your bank account, so you don’t have to keep track of bills. This assumes you have the money in the account to pay off the credit card.

Please note: Prepaid Credit Cards do NOT help you build credit. You’ve prepaid the amount on the card, so no one is actually offering you any credit.

Courtesy of Kelly Hudson – AMP – DLC Canadian Mortgage Experts based in Richmond, BC

As we’ve been reporting for months on our North East blog, instead of protecting many homeowners, the federal government’s restrictive mortgage rules are pushing people out of the safe mortgage market, and into the arms of secondary lenders.

By pushing people to the alternative lending market, they’re being pushed away from the safe harbour of high-quality lenders and into a less regulated and higher-interest area of the market.

To be clear: federal government policies are producing the opposite result of what the stated intention of the policies were.

What’s happened is the new rules, particularly the stress testing, have begun excluding many responsible Canadian homeowners who had previously qualified for mortgages, so many are unfortunately trying their luck with alternative lenders; either to handle their entire mortgage (highly inadvisable), or to top up a down payment.

In a recent paper for CIBC, economist Benjamin Tal says the data in Ontario shows people are increasingly looking to the alternative market for their mortgages.

“Over the past two years, mortgage originations provided by alternative lenders rose by a cumulative 27% while originations in the market as a whole fell by 11%,” Tal said in his report.

In pure dollar figures, he said the alternative mortgages now account for 7% of the market, up from 5% just two years ago.

This trend is worrying because desperate homeowners are seeking relief from these lenders, who will tell them they are suddenly able to qualify for a mortgage. There is, of course, a catch.

What these homebuyers may not realize is why they’re being accepted for those loans.

First, the alternative lenders tend not to be so strict when applying the stress test, because they don’t have to be. Regulation is looser on the alternative market, so by letting debt-to-income ratios climb much higher, it makes it easier for people to qualify for a mortgage. The catch is that by letting those ratios go higher, the homeowners are taking on more risk.

And more risk means lenders need to get something from consumers to make it worth their while. So, they’ll charge higher interest rates. They’ll tack on fees. They’ll add clauses to your mortgage that make it difficult—and costly—to refinance or get out of your mortgage.

Instead of paying in the 3% range, you’ll find yourself paying rates closer to 6%. Over the life of a mortgage, that’s thousands and thousands of extra dollars you’re flushing down the toilet, just on interest.

Someone who’s been denied a mortgage offered by a large bank or another first-tier lender and has been able to find a mortgage elsewhere may be relieved to be in their new home. But they’re sitting on a growing pile of toxic debt.

Things get even worse when homeowners find themselves on the private market.

Consider someone who’s been turned down for a traditional mortgage, and turned down again for a mortgage on the alternative market. Instead of paying that 6% on for an alternative mortgage, you’ll be looking at rates comparable to credit cards; in the double digits, sometimes as high as 21%.

To make matters worse, you’ll be trapped. These private lenders often set the value of your house much higher than anyone else would, essentially locking you in with them. Even if you’re able to turn your financial circumstances around, there’s no way you can refinance a loan for a property worth less than the mortgage is valued.

Until the government changes direction, consumers on the edge of the primary market are just going to have to wait a bit longer to build their nests, lest they get themselves into real trouble.

If a reputable broker is telling someone their file doesn’t work, there’s probably good reason for it. People aren’t turned down for mortgages because a bank or a broker doesn’t want their financing. They’re being turned down for specific reasons.

The whole purpose of these rules, like the enhanced stress test, was to keep people from taking on toxic debt. And what the rules are doing in practice is placing those marginal homeowners in a situation much worse than what they’re being protected from.

Courtesy of Terry Kilakos – AMP – North East Mortgages based in Ville Ste-Laurent, QC

With approximately 1,000 people retiring every day in Canada, it’s not surprising that there has been an increased demand for Reverse Mortgages.
A Reverse Mortgage can assist people aged 55+ to realize their dreams in retirement. Whether they want to travel, help their kids or grand kids or even just supplement their monthly income, a Reverse Mortgage can be an effective way to have their home assist them to meet those goals.
There is a lot of misinformation out there however, that could make people hesitant to get into a Reverse Mortgage.
Many people think that the Bank will own their home but this is completely untrue. A Reverse Mortgage is just that – a Mortgage registered on the home’s Title, just like any other bank mortgage. The client retains full ownership and control of their home. They have the freedom to decide if and when to move or sell.
Another misconception is that you could end up owing more than your house is worth. In fact, due to the Reverse Mortgage lender’s conservative lending practices, you can be confident that there will be equity left in the home when the loan is repaid. They will only issue a Reverse Mortgage up to 55% of your home’s value so there is lots of equity remaining to offset accrued interest charges even if you choose to make no payments at all.
In fact, over 99% of Reverse Mortgage clients have equity remaining in the home when the loan is repaid.
Many people view a Reverse Mortgage as a ‘last resort’. In fact financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it’s tax-free money, it allows retirement savings to last longer.
Some people think that you cannot get a reverse mortgage if you have an existing mortgage. But many Reverse Mortgage clients use the funds to pay off their existing mortgage and other debts, freeing up cash flow for to use as they wish – and be free of regular mortgage payments too.
I personally have parents over 70-years that could be looking at the expense of Assisted Living for my Mom in the near future. They own their home outright and once both of them are retired that added cost could be too much for their pensions and could force them to sell their home before they’re ready.
I have advised them of the Reverse Mortgage option and we have decided to look into that possibility when the time comes. It is my belief that nobody should feel forced to sell their home and they will explore any options available to them so they have choices.
If you’d like more information on how a Reverse Mortgage may work for you, I recommend speaking with a Dominion Lending Centres Mortgage Professional to get all the facts.

Courtesy of Kristin Woolard – AMP – DLC National based in Port Coquitlam, BC