The Canadian mortgage industry has never been more confusing. Do I use a broker? Do I go straight to my bank? Who can get me the best rate? Who can give me the best independent advice?
Alma Pasic has been helping clients navigate the confusing World of mortgages and financing in Canada for almost 20 years. Using her expert knowledge of the industry and relationships with leading financial institutions, Alma gets her clients the approvals needed with the best terms.
As well as being the coauthor of “Complete Home Buyer’s Guide for Canadians”, available on amazon.ca, Alma is also a leading provider of real estate investment seminars throughout the Lower Mainland.
She offers a full service financial platform across a wide range of products and options by working with a range of realtors, accountants, builders, developers and financial planners.
Alma has the resources and relationships to access the complete range of mortgage options.
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Are Reverse Mortgages a Good Idea?
Are Reverse Mortgages Ever a Good Idea?
Home equity is a tempting source of capital or income for older investors but what are the hidden catches? Gordon Powers of RateSupermarket.ca offers advice
November 18, 2014
Gordon Powers RateSupermarket.ca
This article originally appeared on financial advice website RateSupermarket.ca. To read the original article, click here.
Ask advisors whether the money tied up in your home should be counted as an asset that you can tap in retirement and youll get a wide variety of opinions.
Most financial planning software programs dont consider home equity when tallying potential retirement income. In looking at the few that do, its clear that theres no agreed-upon method for calculating its impact on your financial future.
Despite this, home equity remains a tempting target for older investors to tap. Dont forget that close to three quarters of Canadians over age 60 are homeowners, not renters a considerably higher rate than for most other age groups.
You can always downsize, of course, and invest the difference. But, other than that, there really arent a lot of options when it comes to wringing money out of your home.
HELOCs Not Generally Available
A home equity line of credit (HELOC) secured against the value of your property is likely your best bet. But these are typically less useful for many older homeowners since they often have a harder time qualifying unless they already have some regular income.
Thats why a growing number of baby boomers exiting the workforce, or in the midst of a grey divorce, are looking to mine the value of their homes through a reverse mortgage.
A reverse mortgage allows you to borrow from your homes equity while not having to make any monthly payments. Unlike most mortgages, theres no credit check, no income confirmation, and no insurance requirement. Approval is based only on your age and home equity.
Another major attraction is that the payments you receive arent considered taxable income and thus wont affect any government retirement benefits.
Qualify As Young As Age 55
All this anticipated demand has prompted HomEquity Bank, the countrys sole provider of reverse mortgages, to recently lower the minimum age threshold for its CHIP Home Income Plan from 60 to 55.
But, before you rush in, understand this: The amount you owe increases over time, while the amount of equity in your home likely decreases. Whats worse, the younger you are, the more the compound interest will grow, and the more you will owe.
And there are a few upfront fees to consider as well.
Watch For Additional Costs
First, youll need a home appraisal which will cost $200 to $400, depending on location. On top of that, lawyers fees, required by law on all reverse mortgage transactions, can range from $300 to $600.
The third setup cost is closing and administrative fees, which amount to $1495 a charge HomEquity has waived during past promotions, at least for buyers willing to lock in for a three or five-year term.
But, even then, this is still an expensive option. Right now, for instance, HomEquity is charging 4.75 per cent on a variable-rate mortgage which is 1.75 percentage points above prime. Five-year terms are available at 5.69 per cent. That compares with rates as low as 3.19 per cent for conventional five-year mortgages.
Debt Doubles Every 11 Years
Going this route means that your debt level is going to double about almost every 11 years at todays interest rates, all the while eroding the value of your estate.
But older Canadians are definitely buying, largely because theyve seen the rates on their fixed-income savings fall significantly while their houses have at least maintained their value or better.
In a world where people are living longer and spending more, the attraction is obvious. Still, tread carefully before you sign up.
Copyright 2015 - See more at: http://www.rew.ca/news/are-reverse-mortgages-ever-a-good-idea-1.1591812#sthash.WmD0dlm9.dpuf
Bank of Canada maintains overnight rate target at 1/2 per cent
The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.
Uncertainty about the global outlook is undiminished, particularly with respect to policies in the United States. The Bank has made initial assumptions about prospective tax policies only, resulting in a modest upward revision to its US growth outlook. Overall, the global economy is strengthening largely as expected and prices of some commodities, including oil, have risen. The rapid back-up in global bond yields, partly reflecting market anticipation of US fiscal expansion, has pulled up Canadian yields relative to the OctoberMonetary Policy Report(MPR).
Bearing in mind the important assumptions embedded in its forecast, the Bank projects that Canadas real GDP will grow by 2.1 per cent in both 2017 and 2018. This implies a return to full capacity around mid-2018, in line with Octobers projection.
In the context of a projection that is largely unchanged, the Banks Governing Council judges that the current stance of monetary policy is still appropriate and maintains the target for the overnight rate at 1/2 per cent. Governing Council will continue to assess the impact of ongoing developments, mindful of the significant uncertainties weighing on the outlook.
Source: Bank of Canada
Canadian Housing Starts Trend Declined in December
The trend measure of housing starts in Canada was 198,053 units in December compared to 200,105 in November, according to Canada Mortgage and Housing Corporation (CMHC).
The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of the state of Canadas housing market. In some situations analyzing only SAAR data can be misleading, as they are largely driven by the multi-unit segment of the market which can vary significantly from one month to the next.
The standalone monthly SAAR for all areas in Canada was 207,041 units in December, up from 187,273 units in November. The SAAR of urban starts increased by 11.8per cent in December to 187,621 units. Multiple urban starts increased by 13.9per cent to 120,750 units in December and single-detached urban starts increased by 8.1per cent, to 66,871 units.
In December, the seasonally adjusted annual rate of urban starts increased in Ontario, Quebec and the Prairies, but decreased in British Columbia and in Atlantic Canada.