For Millennials, buying a home is a distant dream unless parents help with down payment . . .

 For parents, a reverse mortgage can provide funds            

Young Canadians living in hot housing markets such as Vancouver and Toronto are increasingly looking to their parents for help with down payments when it comes to purchasing their first home.  And, for parents who have seen the value of their homes rise dramatically in the last 10 years, a reverse mortgage is often an attractive way to assist adult children.

That's according to HomEquity Bank experts, who are helping more Canadian seniors set up reverse mortgages so funds may go to adult children needing a down payment on their first home.  

And, financial experts are seeing the same trend of parents helping adult children purchase a first home.

"Ten years ago, this topic rarely came up as most seniors were more concerned with remaining self-sufficient. And, first time homebuyers were purchasing houses on their own. That's changed. Up to 30% of my clients aged 60+ now want to discuss to what degree they can help their adult children financially," explains Rona Birenbaum, financial planner and founder, Caring for Clients.

In fact, it's become such a large part of its service offering that Caring for Clients created a comprehensive, 20-hour assessment program to help clients best determine:

• What is a safe amount to provide to adult children?
• How to be fair and equitable with all children.
• With the amount of money provided, what options are available to adult children? For example, what size mortgage is viable if using funds to purchase a first home?
• How can they protect their money gifted to adult children?

"Most parents want to know that they can protect their money and still lend funds to adult children wanting to purchase a home. By setting up the financial assistance as a zero-interest mortgage, registered on the property, the funds are protected. So, in the event of divorce and the sale of the home, the money goes back to the parents," adds Ms. Birenbaum.

However, if over the long term the marriage does not break down, the parents simply de-register the mortgage and the money is considered a gift, she notes.

"Without help from parents, it's getting to be next to impossible to get into the housing market – especially in Toronto and Vancouver," explains Ms. Birenbaum.

Adds Yvonne Ziomecki, SVP, HomEquity Bank: "The seniors we work with to provide reverse mortgage solutions tell us without financial help, their adult children would be locked out of the housing market.  So, tapping into the equity of their home and providing a down payment becomes an important way to give their children a way to enter the real estate market."

For many first home buyers, condos are a way into the real estate market. The average cost of a condo in Toronto, according to information released in April, 2016 by the Toronto Real Estate Board (TREB) is $393,589. In Vancouver, according to information released in January, 2016 by the Real Estate Board of Greater Vancouver, condos now sell for, on average, $466,600.

HomEquity Bank, the only Canadian bank working exclusively with seniors, provides funds through its CHIP reverse mortgage solution www.chip.ca. Seniors can supplement their income, or tap into the equity of their home, via reverse mortgage monthly or lump sum payments.

About HomEquity Bank

HomEquity Bank is a Schedule 1 Canadian Bank offering the CHIP reverse mortgage solution www.chip.ca.  It was founded 30 years ago as an annuity based solution addressing the financial needs of Canadians who want to access the equity of their top asset – their home. 

The solution to high interest credit payments

What Is a Debt Consolidation Mortgage? A debt consolidation mortgage is when you refinance your mortgage to incorporate all your high interest debts into one payment – your mortgage. Find an affordable home in need of TLC and transform it into that perfect home you always dreamed of; with new bathrooms, kitchen, and hardwood floors. Add the estimated costs of the renovation to your mortgage at the time of purchase to finance the entire renovation transformation without having to wait! Debt Consolidation Benefits • A much lower monthly interest rate that all your debts will now fall under • Lower monthly payments • The comfort and convenience of making only one monthly payment. • Improved credit score from making all your payments on time. Here’s an example showing the effect on your monthly payments:

Now all that’s left is to figure out precisely which solution is best for you, and wipe out all those high interest payments. You already have the mortgage, so if you also have some high interest debt you’d love to unload... Call me today!

Mortgage Architects	Steven Porter CRMS ABR SRES Agent Lic. No. M15001919 Mortgage Agent P 905-878-7213 C 905.875.2582 F 416-900-8227 Steven.Porter@mtgarc.ca Brokerage #10287 14 Martin Street, Milton, ON, L9T 2P9
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Retiring with a Mortgage?

Throughout our working careers the goal most often is to own our home, mortgage free at least by the time we retire.

Here are a few considerations for you if you have reached your retirement, still have a mortgage and want a little extra money to enjoy your retirement years.

Downsize
By selling you your larger or higher priced home with a mortgage you may be able to purchase a smaller or lower priced home in another area and eliminate or reduce the size of your current mortgage.

Refinance
If monthly cash flow is a concern, refinancing your mortgage to a lesser rate and.or extending your mortgages amortization period could reduce you monthly payment obligations.

Alternative Cash Flow
Your home may lend itself to creating an income suite to generate monthly rental income. The money required to complete such a project my be accessed through the equity in your home.

Reverse Mortgage
Switching your current mortgage to a reverse mortgage with no monthly payments may also be a beneficial consideration.

Changes like the ones listed above should not be taken lightly. Be sure to discuss these options with you financial professionals and your mortgage lender.

Steven Porter, Mortgage Advisor with CIBC. steven.porter@cibc.com

Should cash-strapped retired homeowners eye HELOCs or reverse mortgages?

 You’re a senior citizen and you don’t have enough income to live comfortably. What do you do?

It’s an all-too-common question, especially with more than half of Canadians carrying debt into retirement. If you own a home with sufficient equity, and you want to keep living in it, two increasingly popular options are a home equity line of credit (HELOC) and a reverse mortgage.

Although both give retirees access to cash, there are significant differences between the two: reverse mortgages are straightforward while HELOCs in retirement are not.
If you borrow modestly and with discipline, however, a HELOC can be the best way to bail you out of a retirement cash jam.

The Home Equity Line of Credit (HELOC)
HELOCs are revolving credit lines offered by banks,brokers and other lenders that let seniors borrow against their homes in small or large increments. They typically require only monthly interest payments, no principal. So if you took out $100,000, you’d pay $292 a month in interest, using current rates of 3.50 per cent.

HELOCs, unlike reverse mortgages, do not require monthly principle payments. However, you can make lump-sum payments whenever you want.

The Reverse Mortgage
HomEquity Bank’s “Canadian Home Income Plan” (CHIP) is Canada’s only widely available reverse mortgage. The bank lends anywhere from 20 to 50 per cent of a home’s value, depending on the applicant’s age, location, existing secured financing and property type.

Last month, HomEquity Bank rolled the “Income Advantage,” which has notable improvements over the traditional reverse mortgage: Most importantly, the rate is lower. If you make pre-set withdraws each month, you’ll pay just prime rate + 1.25 per cent (4.25 per cent today). That compares to rates of prime + 6.00 per cent in 2009.

Other improvements include lower fees, the ability to take smaller monthly advances instead of big lump sums (which rack up unnecessary interest), the option of locking in variable-rate borrowing, and no rate surcharges on existing customers who renew.

Which is better?
To get a HELOC you have to qualify. The lender will check your credit, verify your income and analyze your debt obligations.

With a reverse mortgage, if you’re 55 or over with sufficient equity and a marketable house, you generally qualify. And you never have to make a single payment, even if you live in your home past 100.

Where HELOCs have appeal is with interest savings and flexibility. They’re roughly ¾ of a percentage point cheaper than the Income Advantage plan, based on current rates. That’s over $3,500 of interest savings over five years on $100,000.

But HELOCs aren’t without risk. The death of a spouse, new lending regulations, changes in a bank’s credit policies or increases in capital costs could all cause a bank to restrict a senior’s HELOC borrowing. Additionally, rising interest rates or excess borrowing could potentially hike monthly payments, making them unaffordable for a cash-strapped retiree.

Another consideration is that seniors needing additional cash flow may use the HELOC itself to make the interest payments. The concern there is the bank getting worried when it sees steadily rising debt with no principal payments.

But Louis-François Poirier, National Bank’s mortgage product manager, says this alone is generally not enough for his bank to restrict a senior’s HELOC, as long as the customer is paying as agreed. “We encourage the customer to make principal payments, but our credit agreement clearly states that the only amount expected monthly is the interest.”

One Possible Strategy
For some retirees, the interest savings of a HELOC is worth the tradeoffs versus a reverse mortgage.
If times get tough and the senior can no longer afford the HELOC payments, or runs out of borrowing room, they can usually refinance the HELOC into a reverse mortgage.

But this requires caution. You never want to borrow more from your HELOC than what HomEquity will lend you. “I would want to ensure that if I was taking that risk, that the client was borrowing no more than 80 per cent of what they would qualify for at the time with us,” says Jeff Spencer, vice-president of national sales at HomEquity Bank.

If you do use a HELOC to supplement retirement income, it’s vital to have an experienced independent financial or mortgage adviser do the math to set an appropriate HELOC limit – one that factors in your age, possible interest rate increases, potential property value declines, and so on.
Retirees should also be mindful of interest rate risk. “Personally, I think it’s a good analysis to test one’s monthly budget with a 200 or even a 300 basis point increase to their contractual (interest) rate,” says Mr. Poirier. A three-percentage point hike would inflate a $292 monthly interest payment (on a $100,000 HELOC) to $542.

Yet another thing to remember is that unforeseen factors can reduce your future ability to refinance. Those risks include a fall in your property value, reductions in maximum lending limits and increases in life expectancy. The Income Advantage eliminates those worries and, to some, that’s worth the 0.75 percentage point rate premium over a HELOC.

“For most retirees that have a retirement plan running out to the age of 90, I don’t think the annual saving of interest is worth the extra risk that their property declines significantly, or loan-to-value calculations change at our firm, or they don’t stay disciplined and use more of the [HELOC] than intended,” HomEquity Bank’s Mr. Spencer adds.

Borrowing your way through retirement
Mr. Poirier says a small but growing percentage of seniors are supplementing retirement cash flow with a HELOC. The same holds true for reverse mortgages.

But while it’s possible to use a HELOC as a “security cushion or emergency fund,” he is first to admit that “for seniors, day-to-day expenses should ideally be covered by retirement savings, as opposed to borrowing.”

Unfortunately, that won’t be a reality for up to one-third of Canadians who rely on their home equity to survive retirement. For many of those folks, the HELOC vs. reverse mortgage debate is one they’re sure to encounter.

By Robert McLister