Toronto condo vip . The mortgage business is booming. Reverse mortgage loans have always been regarded by many as the last choice when the elderly encounter financial difficulties after retirement.
But it has been very popular in recent years, and during the COVID-19 pandemic, it seems that more and more elderly people are involved in it, allowing banks operating reverse mortgage loans to make a lot of money.
The leader of this business in Canada is HomeEquity Bank, which is not only the largest, but also has the longest history. Yvonne Ziomecki, head of market research and marketing at the bank, told the website that its lending increased by 14 per cent in the last quarter of 2020.
The other organization is Equitable Group Inc. Equitable Bank’s shares soared and business boomed thanks to a boom in reverse mortgages.
The bank doubled its reverse mortgage loans between November 2019 and November 2020, according to data provided by the Office of Supervision of Federal Financial institutions (OSFI).
In fact, Canada’s largest commercial banks have never offered reverse mortgages, and only two financial institutions have provided such loans.
Both banks have told Global News that first of all, long-term care homes (LTC) in Canadian provinces have become the hardest hit after the COVID-19 outbreak, and concerns about LTC facilities and services have made many elderly people do not want to live in LTC, but want to retire in their homes, so reverse mortgage has become a financial choice for many of them.
The second is the surge in Canadian house prices under the epidemic. According to data released by the Canadian Association of Realtors (CREA), the national average house price reached a record $607280 in December, up 17.1% from the last month of 2019.
The third is historically low interest rates. On January 20th the Bank of Canada kept the overnight interest rate at 0.25% and reiterated that it would keep borrowing costs low until the damage caused by the epidemic in 2023 was fully repaired.
It is clear that rising house prices mean that many older homeowners now have more room for reverse mortgages, while low interest rates make it cheaper to do so.
The two banks also remind consumers that on the one hand, conditions are needed to obtain reverse mortgages, and interest rates are relatively high.
The main conditions include: if you own a property and are at least 55 years old, you can borrow 55% of the value of the property by mortgaging the property. There is no need to repay the principal and compound interest before you sell your house or die. Both interest and principal come from the net worth of the house, and when the house is sold, the bank gets the money back. On the other hand, borrowers can choose to get an one-time loan or a certain amount of cash on a regular basis.
However, in order to ensure the good reputation of the loan, the homeowner must pay property tax and housing insurance, and be responsible for maintenance to ensure that the property is maintained in good condition.
Many borrowers use reverse mortgages to repay other debts, a strategy that allows them to reduce debt and free up some cash flow. Older people have also traditionally used these loans to provide themselves with regular and tax-free income subsidies.
Equitable Bank parent company Equitable Group Inc. CEO Moore (Andrew Moor) once told the Canadian Financial Post (Financial Post) that Canada’s population is aging, but not everyone is well off after retirement. The source of income is gone, some people are still in debt, and house prices are still very high, so they are unwilling to sell their houses for large houses for small houses, so they use reverse mortgages to increase new sources of income.
But in recent months, Chiomech says she has noticed an increase in the number of applicants who want to help their children through housing loans, and even for their grandchildren to enter the real estate market.
Ziomech also warned that anyone who borrows through reverse mortgages will worry about higher borrowing costs because reverse mortgages are actually very expensive from the start.
For example, HomeEquity Bank currently offers a fixed interest rate of 4.59% for a five-year CHIP discount to most customers, for example. But today, by contrast, qualified borrowers can get a fixed five-year mortgage rate for less than 1.5 per cent.
Alexandra Macqueen, a registered financial planner, commented that, historically, a five-year mortgage rate of about 5% was not ridiculously high.
Although borrowing costs are likely to rise in the future, people with reverse mortgages still have a lot of incentive to join at low interest rates, she added.
Falling house prices mean that once the house is sold and the reverse mortgage is repaid, the homeowner or his heirs have even less money left, if any. However, borrowers do not have to worry that the value of the home is lower than the amount of the loan, because both HomeEquity Bank and Equitable Bank guarantee that if this happens, they will bear the loss.