Your Parents Owe $500,000 to CRA…Can a Reverse Mortgage Help?Reverse Mortgages have had their share of misconceptions. In fact, we are often approached with false assumptions and unfounded facts about the product that steer the public to think of the product in a negative light. This article will cover one of the most common myths and the real facts behind this myth that has long been misinterpreted.

Myth: One of most common misconceptions that we hear time and time again is that you will lose ownership of your home to us.

Fact: This statement is false. HomEquity Bank, the provider of the CHIP Reverse Mortgage has taken several measures that ensure the protection of your equity.

1) Retain ownership of your home: Just like with any other mortgage, your home is used to secure the loan, which means that HomEquity Bank is registered as a standard charge on title. You, as a customer DO NOT transfer ownership of your home to us. In fact, once it’s time to pay back the mortgage you or your heirs have the choice to settle the loan however you or they want. Selling the home is the most common option, but it is not mandatory.

2) Our conservative lending practices: In our ads and on our website, we remind the customers that they can get up to 55% of the value of their home in a reverse mortgage loan. Of course, this amount does depend on the borrower(s) age, their property type as well as the location of their home. But as a rule of thumb, the younger the borrower is, the less they will qualify for and the older the borrower is, the more they will qualify for. This is because we want to make sure that the borrowers reverse mortgage loan doesn’t exceed the value of their home.

3) The potential value appreciation of your home: Many people don’t realize that their home may appreciate in value, however the interest that accrues only accumulates on the small borrowed amount of the home. That is why we say in our marketing pieces that “99% of homeowners have money left over” when their loan is settled.

This graph illustrates how the interest is affected when a home appreciates in value. For illustration purposes, we have used 3%, a modest level of home appreciation, which allows for equity preservation after a borrower takes out a CHIP Reverse Mortgage for 15 years. This example illustrates the following:

Home appraised at $500,000.
Homeowner(s) qualify for $200,000 (40%) of the value of their home in a CHIP Reverse Mortgage.
The homeowner(s) take the CHIP loan for 15 years before they move, sell or pass away.
The home appreciates at 3% and the new home value after 15 years is $778,984.
The principal plus interest total $457,288 and the estate still has $321,696 in equity (41% of the home value at time of sale).
Home Equity Preservation Graph – CHIP Reverse Mortgage
The following graph is for Illustration purposes only *

Home Equity Preservation Graph – CHIP Reverse Mortgage The following graph is for Illustration purposes only

4) Negative equity guarantee – Many people ask, “what happens if the house doesn’t appreciate in value, and in fact depreciates?” Our negative equity guarantee ensures that if your home depreciates in value at the time the home is being sold, and the loan amount due is more than the sale amount of the property, the homeowner or the heirs will not be financially penalized for being on title of the home. In fact, HomEquity Bank, will pay the difference between the sale amount and the loan amount when the loan amount due is more than the sale amount of the property. However, just like all other home equity loans, the homeowner(s) must keep their property taxes up to date, and maintain the condition of their home. If these conditions are met, the borrowers will never owe more than the fair market value of their home, when the home is sold.

The above measures are all the reasons why a CHIP Reverse Mortgage customer will not lose their home to the lender. A CHIP Reverse Mortgage provides a great solution for a growing number of Canadian retirees. For more information on this solution for homeowners 55+, contact your local Dominion Lending Centres mortgage professional.

* The illustration uses conservative values:

Example based on the national price of Canadian homes of $500,000 (Average home price in Canada is $519,521 according to the CREA, February 2017)

Example based on CHIP Reverse Mortgage advance of 40%
Home appreciation of 3.00%. Average home appreciation is 7.16% annually. (Source: CREA, Canadian Real Estate Association 15-year national house appreciation average, February 2017). HomEquity Bank makes no representations on future housing market performance.

CHIP interest rate of 5.59%. The Annual Percentage Rate (APR) is 5.79%, which is the estimated cost of borrowing for 5 years expressed as an annual percentage. The APR includes interest and closing costs.

YVONNE ZIOMECKI
HomEquity Bank – Senior Vice President, Marketing and Sales

Getting a Mortgage After Consumer Proposal or BankruptcyLife can definitely throw some challenging financial situations your way. As mortgage professionals, we can provide solutions and strategies during or after these challenging times in order to get you back on track. We have access to banks, trust companies and mortgage companies that specialize in this transitional period to help you move forward with the best mortgage plan for you. We protect your credit by negotiating with multiple lenders to find a solution for you.

If you have never owned a home and have had a consumer proposal, the good news is that you are already accustomed to the discipline of saving money every month. Should you choose to continue to grow your savings, those funds can then be put toward a down payment and re-establishing credit.

If you own a home already, there are lenders that will help you refinance and pay out your proposal earlier in order to accelerate your transition period.

After bankruptcy, different lenders will issue mortgages based on the amount of time since you were discharged, the amount of down payment on a purchase and/or the current equity in your home if your already own. Lenders then price their rates based on these aspects of your application.

At Dominion Lending Centres, we look forward to learning about your journey while protecting your credit and guiding you through the best strategy on a moving forward basis.

ANGELA CALLA
Dominion Lending Centres – Accredited Mortgage Professional

If you’re on the hunt for your first home and want to have a smooth and successful home purchasing experience avoid these common first-time homebuying mistakes.

1. Thinking you don’t need a real estate agent

You might be able to find a house on your own but there are still many aspects of buying real estate that can confuse a first-time buyer. Rely on your agent to negotiate offers, inspections, financing and other details. The money you save on commission can be quickly gobbled up by a botched offer or overlooked repairs

2. Getting your heart set on a home before you do your homework

The house that’s love at first sight may not always be what it seems, so keep an open mind. Plus, you may be too quick to go over budget or may overlook a potential pitfall if you jump in too fast.

3. Picking a fixer-upper because the listing price is cheaper

That old classic may have loads of potential, but be extra diligent in the inspection period. What will it really cost to get your home where it needs to be? Negotiating a long due-diligence period will give you time to get estimates from contractors in case you need to back out.

4. Committing to more than you can afford

Don’t sacrifice retirement savings or an emergency fund for mortgage payments. You need to stay nimble to life’s changes, and overextending yourself could put your investments – including your house – on the line.

5. Going with the first agent who finds you

Don’t get halfway into house hunting before you realize your agent isn’t right for you. The best source: a referral from friends. Ask around and take the time to speak with your potential choices before you commit.

6. Diving into renovations as soon as you buy

Yes, renos may increase the value of your home, but don’t rush. Overextending your credit to get it all done fast doesn’t always pay off. Take time to make a solid plan and the best financial decisions. Living in your home for a while will also help you plan the best functional changes to the layout.

7. Choosing a house without researching the neighbourhood

It may be the house of your dreams, but annoying neighbours or a nearby industrial zone can be a rude awakening. Spend time in the area before you make an offer – talk to local business owners and residents to determine the pros and cons of living there.

8. Researching your broker and agent, but not your lawyer

New buyers often put all their energy into learning about mortgage rates and offers, but don’t forget that the final word in any deal comes from your lawyer. As with finding agents, your best source for referrals will be friends and business associates.

9. Fixating on the lowest interest rate

Yes, a reasonable rate is important, but not at the expense of heavy restrictions and penalties. Make a solid long-term plan to pay off your mortgage and then find one that’s flexible enough to accommodate life changes, both planned and unexpected. Be sure to talk your your Dominion Lending Centres mortgage professional to learn more.

10. Opting out of mortgage insurance

Your home is your largest investment so be sure to protect it. Mortgage insurance not only buys you peace of mind, it also allows for more flexible financing options. Plus, it allows you to take advantage of available equity to pay down debts or make financial investments.

MARC SHENDALE
Genworth Canada – Vice President Business Development

Down Payment Verification – 5 Key PointsOne of the essential aspects of every mortgage application is the discussion pertaining to your down payment. Home purchases in Canada require a minimum down payment of your own funds to be put towards the deal. Your stake in the purchase. It is important that during the discussions with your Mortgage Broker that all the cards are on the table pertaining to your down payment. Be upfront about your down payment and where it is coming from. Doing so can save you time and stress later on in the process.

Most home buyers are aware that they will require a certain amount of money for a down payment. What many do not realize is that lenders are required to verify the source of the funds to ensure that they are coming from an acceptable source. Here are a few facts to keep in mind:

1. Lenders require a 90-day bank account history for the bank account holding the down payment funds. The statements must include your name, account number and statement dates.

2. A common hesitation that we often hear from clients is that their bank statements include a lot of personal details. As professionals, we completely understand our clients concerns pertaining to your personal information and we always ensure that information is protected. Statements provided with blacked out names, account numbers or any other details are not acceptable. Unaltered documents are a requirement of confirming the down payment funds.

3. All large or unusual deposits need to be verified to ensure the source of those large deposits can be confirmed and can be used towards the down payment.

• Received a gift from an immediate family member? Easy, Gift Letter signed.
• Sold a vehicle? Easy, provide receipt of sale.
• CRA Tax Return? Easy, Notice of Assessment confirming the return amount.
• Transfer of funds from your TFSA? Easy provide the 90-day history for the TFSA showing the withdrawal.
• Friend lent you money for the house purchase…. Deal Breaker.
• A large deposit into your account that you cannot provide confirmation for…. Deal Breaker!

4. You were told that your minimum down payment was 5%, great! However, did you know that you are also required to show that you have an additional 1.5% of the purchase price saved to cover closing costs like legal fees?

5. Ensure that the funds for the down payment and closing costs stay in your bank account once you’ve provided confirmation. Those funds should only leave your account when they are provided to your lawyer to complete the purchase. Lenders have the right to request updated statements closer to closing to ensure that the down payment is still there. If money is moved around, spent or if there are more large deposits into your account, those will all have to be confirmed.

The last thing that anyone wants when purchasing a property is added stress or for something to go wrong late in the process. Be open with you Mortgage Broker, we are here to help and to guide you through the process. Not sure about something pertaining to your down payment funds? Ask us. We are here to work you through the buying process by making sure you know exactly what you need to do.

Thinking about buying a home, rental or vacation property? Talk to a dedicated Dominion Lending Centres Mortgage Professional in your area to find out about what your down payment requirements will be.

Written by: NATHAN LAWRENCE
Dominion Lending Centres – Accredited Mortgage Professional
Nathan is part of DLC Lakehead Financial based in Thunder Bay, ON.