Reverse Mortgages - Don’t be fooled by the critics

Reverse Mortgages are mortgages available to homeowners over 55 and can provide up to 55% of the value of your home.  No payments are required, and the mortgage isn’t due until sale of the home or death.

Critics of the Reverse Mortgage most often cite the “high” interest rate as the major deterrent of the program with “statistics” such as:

“HomeEquity Bank and Equitable Bank charge 5.74 per cent for a five-year fixed mortgage. Conventional five-year fixed mortgages are currently being offered online for as low as 2.4 per cent.

This is not a valid comparison.  Let’s compare apples to apples not apples to oranges.

2.4% is the best rate being offered by banks for a 5 year, high-ratio, variable rate, insured mortgage to income qualified borrowers.  This is not a product the majority of seniors come even close to qualifying for.  These mortgages are based on income and are underwritten based on the stress test rate (currently 5.19%) and debt service ratios.

A typical retired senior couple with only CPP and OAS income of approximately $3,000 a month will only qualify for around $100,000.  For most homeowners, particularly in Vancouver or Toronto, this would be a very low ratio mortgage.  This mortgage would require monthly payments and would be due at the end of its term and may not be renewed, at the discretion of the lender.

Most seniors do not qualify for conventional financing.  Their more likely option is in the non-income qualified private market.  The best rate available today would be 5.99% with a 2% lender fee and a one-year term.  Monthly payments are required and at the end of the term the mortgage can usually be renewed but with a renewal fee being charged.  This is the valid real-world interest rate comparison that should be made.

Something most people don’t know is that interest on a Reverse Mortgage can be paid monthly without a penalty making them a very cost-effective alternative to private financing for those that are able to make monthly payments and, if you decide to, you can stop making the payments any time, something a conventional lender would be very upset with.

 

Will we all outlive our retirement savings? Experts say yes!!

The good news is that we are living longer. The bad news is that we are living longer. While it’s wonderful that medical advances are enabling us to live an average of 15-20 years more, that also means our retirement nest egg needs to stretch further.

Canadians need to be made aware that the old math no longer works. If they are like most, they are saving the same amount, based on financial plans calculated to 80-year life expectancies.  Today’s statistics tell a much different story than when their retirement plan may have been formulated:

  • 25% of 65 year olds today will live past 90

  • 10% of 65 years olds today will live past 95

  • Chances are 50% that one member of a marriage will be alive at 92

  • Living until 100 is becoming more and more common

Not only that, but in 45% of couples, the wife will outlive her husband by 5 years. Since women typically earn less than men do during their working years, their retirement nest eggs are significantly smaller. According to The Globe & Mail, most women experience a $160,000 shortfall in retirement funds, putting them at a greater risk to outlive their money.

Experts pin the typical financial shortfall most Canadians will face at $10k/year. So how can you make your money stretch to cover that shortfall?

Factor in inflation. A 3% inflation rate over 24 years will mean money will be worth only half what it once was. So, if one retired at 60, by age 84 s/he would need twice the amount of money to live in the manner they are now.

Work longer to save more. Every year of work equates to more financial security. During that time, savings can accumulate, investments can compound, dipping into investments for living expenses is delayed. Even working part time can make a big difference. The new retirement age has become 65, so more Canadians are delaying exiting the workforce.

Put off collecting CPP. The Government of Canada lets us start drawing from the Canada Pension Plan as early as 60, or as late as 70. Start drawing down early and monthly payments will be less; delay receiving benefits and those monthly payments will go up. If possible, use retirement funds to delay drawing down from CPP.

Adjust spending habits. Once retirement hits, day-to-day spending automatically goes down. Commutes to work and work-related expenses become history, taxes will go down. Yet finances still need to last. Longevity doesn’t necessarily mean extra healthy years; money may be needed for medical costs, live in help, or assisted living. More mindful spending can go a long way.

Consider borrowing against home equity.  Home ownership presents a smart way to help make up for a financial shortfall. Homeowners can use a Reverse Mortgage to leverage equity in a principal home in order to get access to funds, tax free. Regular mortgage payments are not required until vacating the home, and it’s easy to get approved.

Revisit the financial plan each year. Health and home situations can change. Unexpected expenses can arise. Whether you do it alone or with a professional financial advisor, regular reviews of your retirement every year can help ensure that your golden years don’t find you in the red.Top of Form

How Volunteering Can Be Just as Good for You as for the Community

Reaching retirement can finally give you the time you need to join the 13 million Canadians who volunteer every year.

Having more spare time – and the desire to use it well – has made retirees the most important demographic among volunteers. When you consider volunteer trends in Canada, retirees aged 65-74 volunteer the most hours in a year and 38% of the most active volunteers are aged 55 and over.

Here we look at reasons why you should consider volunteering and the kind of volunteer positions available.

Why volunteering is good for you

There are so many benefits of volunteering, which go far beyond its immediate impact. For many people, volunteering is about giving a boost to a cause that they support. This could be a volunteer position that supports healthcare, the elderly, the homeless, animals, children, the arts or the environment. Many organizations rely on volunteer positions to survive and without this support, many essential services would be lost.

Research suggests that volunteering also creates “social cohesion” by promoting trust and a sense of belonging in communities. Volunteers also benefit from the experience of the work itself. They can acquire new skills learnt on the job as well as knowledge of social or political issues.

Volunteering can also bring these benefits to volunteers:

  • Being sociable and meeting new people

  • Gaining new experiences

  • Challenging yourself

  • Fulfilling the need to be needed

  • Keeping your mind and body active

  • Having fun

A study by Volunteer Canada also found that volunteers are happier and healthier in their later years than those who don’t volunteer.

Volunteer trends in Canada include the ability to be flexible with your volunteering time. Many organizations recognize that retired volunteers may only be able to work a certain number of days or at certain times of the year and they’re often willing to accommodate your schedule.

Finding the best volunteer position for you

Many people look to put their lifelong skills and experience to good use when volunteering. Retired business executives serve on the boards of charities, former health care professionals volunteer in hospitals and ex-teachers work with children.

Other non-profit volunteer positions allow people to indulge their hobbies. Budding photographers can take pictures of charity events, keen gardeners can work on community garden projects and sports enthusiasts can become coaches.

Others use volunteering to get involved in a field that they love but have never tried before. For theatre lovers there are volunteer positions at children’s and community theatre, movie buffs can work at film festivals and animal lovers can help at animal shelters.

Some volunteers prefer to work for a specific organization. This could either be because they feel a strong affinity to that organization’s work, or they or a loved one may have been helped by it. For them, the kind of work is not as important as the organization they volunteer for.

Where to look for volunteer opportunities in Canada

If there is a specific organization or charity that you want to volunteer for, contact them directly. Many have volunteer coordinators who can tell you which kinds of volunteer positions are available.

The internet is another good source of information on volunteer opportunities in Canada. Most charities and not-for-profit organizations list non-profit volunteer positions on their websites.

Volunteer Canada and Charity Village carry extensive lists of volunteer positions in Canada, in a wide variety of organizations. Pick your location and then search by areas of interest. This could be working with animals, children or seniors, the environment, disabilities, human rights and many more.

Alternatively, you could look for specific volunteer positions. Examples include management, counseling, entertainment, translation services, photography/ videography, gardening, mentoring, IT support and marketing.  

There are so many volunteer opportunities in Canada that you are likely to find one that suits your interests or skills.   

Overseas volunteering – combine a trip with good deeds

There are a number of organizations that coordinate non-profit volunteer positions overseas. Quite often, the majority of their volunteers are over 55 and some have programs designed specifically for retired volunteers.

International volunteer opportunities are available in Asia, South America and Africa, as well as Australasia and Europe.

The jobs involved in retired volunteer programs vary greatly and include teaching, caring for at-risk youth, health care, construction, conservation, archeology, research and sports coaching. You choose the duration of your volunteering trip, which can range from a week or two to several months.

Most organizations that offer international volunteer opportunities charge fees to participate. Costs vary per organization but the price per week typically reduces the longer you stay. Fees can include accommodation, food, airport transfers, training and transport to work. Your flights and any necessary visas are usually not covered.  

The websites of organizations like Projects Abroad, Global Vision International, International Volunteer HQ and Oceanic Society Expeditions can give you an idea of the kinds of international volunteer opportunities on offer and the costs that go with them.

How volunteering can fit into your overall retirement planning

Volunteering can play a role in most aspects of retirement planning. On retiring, many Canadians plan on spending more time travelling, on recreation and hobbies and with family. 

Volunteering allows you to combine some or all of these plans. You can volunteer as a family, at your grandchildren’s school or at a relative’s nursing home. You can find a volunteer position that involves your favourite hobby or sport, such as being a swimming buddy for someone with a disability or running a chess club at a youth drop-in centre.

Many people plan on travelling extensively after they retire and, as we’ve seen, there are many opportunities to volunteer abroad. Another big part of retirement planning is giving to worthy causes. Volunteering is a great way to get to know an organization and to maximize your positive impact with both your time and money.

A win-win situation

With so many benefits to volunteering, it’s not surprising that it’s among the most popular activities for many retirees. You’re able to use your experience and expertise to make a real difference to the community and to the lives of others.

You’ll also give yourself a real sense of purpose, build up your social life and improve your physical and mental health. Is it time for you to become one of the 13 million Canadian volunteers?

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Downsizing the home not a guaranteed financial windfall in retirement

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Three in ten (27%) Canadian boomers who chose to downsize say costs were more than expected; four in ten (39%) who haven’t downsized are skeptical of the potential savings

For older Canadians considering selling a home to retire in a smaller living space or a more affordable community, downsizing may sound like a financial bargain, but 39 per cent of current homeowners are skeptical that downsizing will actually save them money. According to an Ipsos survey commissioned by HomeEquity Bank, as 27 per cent of downsizers shared, the costs were more than they expected, suggesting that the expenses from downsizing can add up quickly.

While there may be certain advantages for some older adults to downsize their home, almost half of Canadian homeowners aged 55+ (48 per cent) say they have no plans to downsize. In fact, within this group that plans to stay put, 93 per cent say they are happy with their current living arrangements.

The findings are supported by award-winning author Joyce Wayne.

“When I downsized it was a huge mistake for me,” explains Wayne. “I was attracted by the lure of improving my cash flow to support my writing career following my retirement, but it didn’t really net out that way after factoring in all of the closing costs and moving expenses. I moved further away from my friends too, which was more difficult than I imagined. After a few years, I moved backed into my old neighbourhood. It’s a big decision that should not be entered into lightly – know your options and really explore them!”

Many older adults are faced with the downsizing dilemma. According to an earlier Ipsos survey commissioned by HomeEquity Bank in July 2018, half (51 per cent) of those aged 75+ say it’s important to stay in their current home because they want to stay close to family, friends or their community, while four in ten (40 per cent) say emotional attachments and memories are what’s behind the importance of staying put in their current home during retirement. The other side of this dilemma is the 31 per cent of homeowners in the most recent survey who say they need the equity from their homes in order to live comfortably in retirement.

“That’s why I’m so passionate about sharing insights through my blog,” adds Wayne. “I want to help retirees and those approaching retirement to think through their options. Before rushing any decisions, they should consult with a financial advisor to consider whether a reverse mortgage is right for them. It may be the best way to stay in their home while enhancing their retirement years.”

“There are real costs to downsizing… financial, emotional and personal ones,” advises Yvonne Ziomecki, HomeEquity Bank’s Executive Vice President, Marketing. “From a financial perspective if you had to move outside your cherished neighbourhood or further away from family and personal support networks, it may mean you’ll spend more resources to maintain

Five Signs You May be Ready for a Reverse Mortgage

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Many Canadians are outliving their retirement savings. Why? Because thankfully, we’re living longer, and our financial plans couldn’t have predicted that. if you can relate to any of the 5 signs below, it may be time to talk about a solution to your problem.

1. You’re running up your credit cards, personal loans or draining your retirement savings.

A Reverse Mortgage consolidates debts by paying off smaller loans with a larger loan at a lower interest rate. The rates on a Reverse Mortgage are much lower than those on credit cards and are comparable to those on a home equity lines of credit.  By consolidating existing debt with a Reverse Mortgage, you will no longer have to remember to make multiple monthly payments; instead you will have one loan with no required monthly payments!

2. You would like to help out your children or grandchildren financially.

You may have talked about helping out with money for a down payment on their first home, tuition or even providing an early inheritance. A Reverse Mortgage can enable you to witness the joy of your gift in use.

3. You’re struggling financially to help your elderly parents.

If the elderly parents take out a Reverse Mortgage on their home, they can enjoy financial independence instead of relying on their children. Funds could be used for home modifications, in-home care, monthly bills or debts, property taxes or anything else.

4. You’re missing payments or were declined for a credit product.

Are you applying for credit products with the bank but being declined? Unlike most lending products, qualifying for a Reverse Mortgage is purposely designed for those who have limited or no monthly income. A Reverse Mortgage can offer you a financial solution with an easier qualification process that ensures the protection of your equity. The Reverse Mortgage also has a negative equity guarantee, which ensures that you will never owe more than the fair market value of your home at the time it is sold. In fact, over 99% of clients have money left over, after the sale of their home.

5. You talk about purchasing a second home or cottage for you and your family, but never can.

You likely can’t afford this kind of property on your retirement income. With the funds from a Reverse Mortgage on your current home, all that can change. There are no regular mortgage payments and the reverse mortgage is repaid when you decide to sell and move out.

Do any of these scenarios sound familiar? If yes, it’s time to talk about a solution. I am a Certified Reverse Mortgage Specialist with over 30 years’ experience in the mortgage business. I would be happy to talk to you anytime about how we can help.

Give me a call at: 604-949-2090

Or email at: patrick@spsealmortgage.com

Or visit my website at: www.seniorsmortgagecanada.com

What Is A Reverse Mortgage?

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Many retired Canadians have been where you are, and many of them were able to turn around their fortunes with a Reverse Mortgage. This unique financial tool allows you to access up to 55% of the equity in your home, tax-free and with no payments required. The funds can be taken as a lump sum or monthly to supplement your income. With that money you are able to increase your cash flow, eliminate debt, and even check a few items off your bucket list.

If you would like to learn more about how a Reverse Mortgage can help you live a more comfortable retirement, please contact me at:

Phone: (604) 949-2090 phone or (604) 505-6208 cell/text

Email: Patrick@spsealmortgage.com

What You Can Do With A Reverse Mortgage

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The tax-free cash you can get from a reverse mortgage can be used for whatever you need it for. Whether it’s for eliminating debt, buying a vacation property, increasing your cash flow, or providing your family with an early inheritance – it’s up to you!

You can access up to 55% of the equity in your home and receive the money in a lump-sum payment, periodic installments, or a combination of the two. If you would like to learn more about how a reverse mortgage can be a tool in your financial plan, please contact me at:

Phone: (604) 949-2090 phone or (604) 505-6208 cell/text

Email: Patrick@spsealmortgage.com

Jan & Jack – A Success Story

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Jan & Jack live in a custom home they built many years ago. Although when they reached retirement they still had a mortgage and inadequate cash-flow to help them make ends meet.

After speaking with some friends, they discovered the CHIP Reverse Mortgage. With this financial tool they were able to access $287,000 of their home’s equity, which allowed them to pay off their existing mortgage and invest in solar panels that ended up providing them an extra $500/month.

Today, Jan & Jack have paid off their mortgage, have increased their monthly cash flow, and enjoy every day in their dream home. If you would like to learn more about the CHIP Reverse Mortgage, please contact me at:

Phone: (604) 949-2090 phone or (604) 505-6208 cell/text

Email: Patrick@spsealmortgage.com