HomEquity Bank, Canada’s only national lender of reverse mortgages, had a record year in 2014, with new business growing by 23 per cent year-over-year. HomEquity Bank administers the CHIP Home Income Plan, which Horizon Equity offers its clients.
The Canadian growth of reverse mortgages is expected to continue. Steven Ranson, president and CEO of HomEquity Bank said: “With the current demographic trends and extended life expectancy we project reverse mortgage originations to grow at 25 – 30 per cent annually over the next few years. We are seeing an increased demand for reverse mortgages as more Canadian seniors look to this solution to address concerns over quality-of-life issues, insufficient savings and pension shortfalls.”
Why Canadians are taking out reverse mortgages
Canadians aren’t just choosing reverse mortgages to make up for shortfalls in retirement savings. Available to Canadians aged 55 or older, reverse mortgages can also allow parents to give adult children money without touching their retirement savings, as a financial instrument for borrowing to invest, and much more. In fact, a number of reverse mortgage customers have very high-value homes and retirement savings – they aren’t trying to make up for a lack of retirement savings.
Of course, they are still an excellent instrument to deal with shortfalls in retirement savings, including cuts to pensions, loss of capital in investments, and more. The lack of monthly payments is especially attractive to people looking to make up the difference between what they do have and what they should have.
A reverse mortgage is only something you would consider for a loan of $10,000 or more, since there are costs associated with it, including legal costs and getting an appraisal for your home. However, the initial costs are made up for by the fact that you do not need to make monthly payments; you only need to pay back the reverse mortgage when you sell your home. Under Canadian law, you can only borrow up to 50% of the equity in your home, ensuring that there will still be funds left over for your estate or an assisted living facility if you require one later in life.
Canadian reverse mortgages: a regulated, solid option
Another reason Canadian reverse mortgages are doing so well is the recognition that they are a valid, regulated financial instrument. Reverse mortgages have received bad press in the past due to the subprime real estate bubble in the United States; reverse mortgages were a big part of this and put many seniors out of their homes. Canada has numerous regulations in place to ensure that the same thing simply cannot happen, including the limitation on how much you can borrow.
Today, reverse mortgages are recommended by financial planners, respected financial journalists, and other financial professionals.
Find out why Canadian reverse mortgages are so popular – contact Horizon Equity today for more information on what a reverse mortgage can do for you.