Traditional Financial Models Make Reverse Mortgages Popular

December 23, 2013 · Print This Article

In a recently published article from The News in Maple Ridge, British Columbia, Chris Hoeppner of HomEquity Bank stated: “There are many people who are house rich and cash poor. They did what they were taught, and did a really good job of paying off that mortgage, but they didn’t have much opportunity to save, so their cash flow is a problem now that they’ve retired.”

This is a very accurate statement for most Canadians who are close to retirement. They were told that if they paid off their mortgages and saved, their retirement funds would be assured. The problem is that life finds a way of cutting into savings, and often the largest source of equity left to retirement-age Canadians is their home once those savings have been reduced. Unfortunately, if you played it safe and did what you thought you were supposed to do, you may not have ended up on top of your retirement savings. And that’s where a reverse mortgage comes in.

HomEquity Bank Providing CHIP Home Income for Over 27 Years
HomEquity Bank is behind the CHIP Home Income plan, which provides Canada’s only reverse mortgage program and has done so for over 27 years. Reverse mortgages are a good, safe alternative to loans or lines of credit, both of which carry monthly payments which can be burdensome on retirees. Hoeppner also points out that not every retiree will qualify for loans or lines of credit, while anyone with a certain amount of home equity will qualify for a reverse mortgage.

Myths About Reverse Mortgages
Many Canadians think reverse mortgages are “bad”, says Hoeppner, because of horror stories in the media about American reverse mortgages. The American reverse mortgage industry is not tightly regulated like the Canadian one is, and you will never owe more than the house is worth. In the States, some reverse mortgages saw borrowers paying back more than they could sell their home for once the housing market crash. There are guarantees in place to ensure that can’t happen in Canada. American reverse mortgages also are written so that the debt is payable if one member of a couple dies, something that again is not done with CHIP.

Demystifying Reverse Mortgages
Hoeppner says that at its core, a reverse mortgage is “just a normal mortgage that doesn’t have monthly payments. The idea is to create flexibility for seniors who have equity in their homes.” Why hang onto this equity until you’re 90? Or move into assisted living when you can use this equity to pay for home care and stay in the home you love? It’s a no-brainer for most Canadian retirees.

If you’re interested in a reverse mortgage, contact Horizon Equity to find out more about how a reverse mortgage can fit into your retirement portfolio.