1. The Bank Owns Your Home
  2. Your Estate Can Owe More Than Your Home 
  3. The Best Time to take a Reverse Mortgage is at the End of Your Retirement

 

Let’s examine each misconception in more detail.

 

  1. The Bank Owns Your Home

 

FALSE. Over 50% of Canadian homeowners over the age of 65, believe the bank owns your home once you have taken a reverse mortgage. Not true! The lender will simply register their position on the title of the home, exactly the same way as you would expect any other mortgage or Line of Credit to be registered on title, with the main difference in the flexibility of not having to make Principal & Interest payments on the reverse mortgage. You remain the homeowner, you own the title. Period!

 

  1. Your Estate Can Owe More Than Your Home

 

FALSE. A reverse mortgage, unlike most traditional mortgages in Canada, is a non-recourse debt. Non-recourse means if a borrower defaults on the loan, the issuer can seize the home asset, but cannot seek any further compensation from the borrower – even if the collateral asset does not fully cover the full value of the loan. Therefore, when the last homeowner is moved to a nursery home or dies (and the reverse mortgage is due), the estate will never be responsible for paying back more than the fair market value of the home. The estate is fully protected – this is not the case for almost any other mortgage loan (specifically secured lines of credit) in Canada, which is full recourse debt. So read the fine print the next time you offer to co-sign for a loan for Mom!

 

  1. The Best Time to take a Reverse Mortgage is at the End of Your Retirement

 

FALSE. This is a common mistake that reflects the “old-school” financial planning mentality. For the majority of Canadians (without a nice government pension), the old school financial planning mentality is about cash-flow, and is as follows:

 a) Begin drawing down non-taxable assets to supplement your retirement income.

 b) Once your non-taxable assets are depleted, begin drawing down more of your registered assets (RSP/RIF) to supplement retirement income.

 c) Once your registered assets are depleted, sell your home, downsize and re-invest to generate enough cash-flow to last you until you die.

 

The problem with the “old-school” financial planning model is two-fold:

 

“Research has consistently shown that strategic uses of reverse mortgages can be used to improve a retiree’s financial situation, and that reverse mortgages generally provide more strategic benefits when used early in retirement as opposed to being used as a last resort.” – Jamie Hopkins, Forbes

In Canada, a reverse mortgage can be set-up to provide homeowners with a monthly draw out of the approved amount. For example: client is approved for $240,000 and decides to take $1000/month. This is deposited into the clients’ bank account over the next 20-years. Interest accumulates only on the amount drawn (i.e.: not on the full $ amount at the onset).

This strategy allows clients to draw down less income from their registered assets to support their retirement lifestyle. In turn, this can create some excellent tax savings, since home equity is non-taxable. Imagine lowering your nominal tax bracket by 5 – 10% each and every year over a 20 year period?! The tax savings can be huge.  You are also able to preserve your investable assets, which historically, can generate a higher rate of return when invested over a greater period of time.

 

At this point you are supposed to say: “This is too good to be true.” Go ahead, say it, and then call me – 604-787-1755.

 

HomEquity Bank, the lone Canadian reverse mortgage lender, has logged a record of new reverse mortgages this year and thus validating rumblings about the anticipated surge in home equity loans.

HomEquity Bank is offering reverse mortgages to Canadians age 55 and older. This year HomEquity Bank is reporting a record of $60 million new reverse mortgages by May of 2017 with a strong target to clip the $100 million mark by the end of the year.

“Canadian seniors are releasing the equity they have built in their homes, transforming it from passive to active,” HomEquity president and CEO Steven Ranson stated recently. “We have seen a shift in mindset: There is a broader understanding of home equity loans. Home equity is often the largest single asset for Canadians, and it is easily unlocked with the help of mortgage experts.”

Many others have pointed to the same fact of Canada’s aging population in parallel with exorbitant growth of real-estate values as a potential source for reverse mortgages demand. For the first time in the nation’s history, adults older than 65 outranked children younger than 15 last year, according to the most recent Canadian census. And as in the United States, Canadian homeowners control a significant amount of home equity – but, unlike their American counterparts, they did not see values fall as precipitously during the Great Recession of 2008.

HomEquity Bank’s reverse mortgage offering is an entirely private program, without the backing of the Canadian government. There is also no claw-back by the Canadian government for any proceeds of such a mortgage. Seniors’ pension claims will not change by receiving funds from a reverse mortgage.

HomEquity Bank’s novel marketing angle is positioning Canadians 55 and older as “the bank of Mom and Dad”, thus spending their retirement cash to put their children through school or to buy homes of their own, thus leaving home equity by means of as their single biggest option for retirement.

 

 

Be your own banker

Equity Take Out Strategy – A Simple Approach

 

The recent increase in property values through a hyperactive real-estate market can work in your favour.

When I began to invest into the Vancouver real-estate market in the early 90s, I leveraged my investments and build on the virtual equity in my homes. I have made Warren Buffets statement of “Buy and don’t Sell” my own and prospered from his investment strategy.

If you are interested to increase your personal wealth through by using your virtual equity in your current home, do contact me and we can discuss on how to do this. I have been successful at this for the past 25 years, and now as a mortgage broker, I have even more insights of leveraging home equity and building wealth on a realistic Equity Take Out (ETO) strategy.

There are no tricks or short-cuts to creating wealth, but there are only sensible and simple ways to make most of your equity in your home. To learn more or to make a personal appointment, contact me here.

 

Reasons to use a mortgage broker

A mortgage broker in Burnaby with more than 25 years of industry experience gained through opportunities in Germany and Canada, Franz Gerber has been helping clients make their mortgage process a quick and smooth one in the area for a long time.

Many people choose to work with a mortgage broker over a bank lender for a variety of reasons. Some enjoy the number of options they are exposed to while others love the personal touch that comes from a relationship with a broker. Franz has identified 4 Great Reasons to Use a Mortgage Broker:

The Power of Choice!

A mortgage broker offers you more options than a bank would. Brokers work with plenty of lenders, all who offer different packages that can be adjusted to fit your specific need. Franz will shop your mortgage to find the best solution that best fits your situation and present you with a list of options for you to choose from. A bank on the other hand may only have two mortgage options for you to choose from which could potentially be unideal for your life at the time.

Franz is also able to secure the best rates because of the vast amount of options available and use it as a negotiation tactic, too.

It’s All About You

To a mortgage broker like Franz, you are the most important person. Firstly, Franz provides his full attention to his clients. He works one-on-one with each of his clients to identify their needs and locate a lender who best fits their needs. He cares about your life and what you are paying for your mortgage which is why he makes sure that your mortgage solution is tailored to your specific needs.

Secondly, Franz works for you. He does not work for a bank or other financial institution. That means that all of his advice and guidance is conducted with your best interests in mind. Typically, brokers cost little-to-nothing to clients as they get paid by the lenders once they find a mortgage option that suits their clients.

Brokers Are Experts

Brokers are experts in the mortgage industry, especially ones who have been around for a long time. Franz, with over 25 years of mortgage experience, has gained valuable knowledge that he uses to help his clients every day. With the knowledge obtained over the years he is able to provide accurate, detailed advice on mortgage products, market conditions and interest rates.

Franz has also learned a thing or two when it comes to negotiating your mortgage. Brokers handle all negotiations and as someone who has developed quality relationships with lenders from working in the industry for so long, Franz is a favourite to secure the most competitive rates and terms.

Everything In One Place

With a broker like Franz, clients are able to get everything they need in one place. Rather than shop a mortgage on your own and visit with numerous lenders, Franz does it all for you and presents you with each option at one time. He also offers many different mortgage solutions to help with whatever it is you need, whether it be buying a second house or looking to refinance your current mortgage.

For further reading on why a mortgage broker is a good idea, check out the following link: http://moneyfacts.co.uk/guides/mortgages/why-use-a-mortgage-broker180511/.

If you’re looking for a mortgage in the area, a Burnaby mortgage broker like Franz Gerber is as safe a bet as you can make. For more information or to begin the journey, contact Franz today!