What is a Reverse Mortgage and How Does it Work? (Ep. 2 W/ Shan De Mel)

[@KimJilene]

Thank you for providing this deep dive on Reverse Mortgages. My pensioner parents got into one last year and I immediately thought it was a bad thing, but your video helped educate me on the benefits of this equity release program. I am very happy to hear that one parent won’t be forced out if the spouse passes, and that the kids are not stuck with the negative equity if it does go over the mortgage value - which in this market, it probably won’t as house prices will continue to steadily climb over the years.

[@ArmandoSardellitti]

Very informative session ... thanks Vince and Shan!

[@wiseoldowlshow]

Glad you enjoyed it!

[@MANUPFORJESUS]

Thank you for clearing up the grey area I had about a reverse mortgage. I believed the myth that the lending institution owned the home. Thank you for being a great teacher! I can now see where a reverse mortgage has some advantages!

[@wiseoldowlshow]

Glad it was helpful!

[@user-si9bz3dl6m]

When I worked as a lender years ago I did an amortization schedule on reverse mortgages based on the current interest rates which was higher than todays rate, but was amazed how quickly the mortgage increased over time. It seemed that when a homeowner was 80 most of the equity would be tapped out and I advised against introducing this product as the possibility of having to go power of sale on an 80 year old would be bad for a bank's image, however that is what could be needed if the individual didn't have the money to pay the larger mortgage balance when no further drawn downs were allowed, also the inheritance is affected and some banks in the USA had been sued by children of adults who entered into these contracts

[@wiseoldowlshow]

You bring up some good points that are key misconceptions about the product. First off, the lender will never kick you out of your home. These products have a negative equity guarantee that prevents a lender taking possession. Secondly, the maximum equity that can be accessed is 25% to 55% and based on your age. The older you are, the more you will access. And finally, at the same time interest is charged over time, the home values most likely will increase as well. The reality is that older Canadians have been handcuffed with the new mortgage qualifying rules and stress test and have limited ability to access equity in their homes. There are private lenders and alternative lenders that charge higher rates and fees or there is a reverse mortgage that allows folks to age in place and provides relief. As more Canadians struggle with cost of living and do not want to give up their homes, this is a viable option. The debate will continue and many will make the best decisions for themselves. As someone who once wasn't a fan of the product, with the banks shutting out older Canadians from accessing traditional mortgages due to debt servicing guidelines, this a good and beneficial option. I appreciate your comment. Cheers, Vince

[@jero_me]

This financial product should not exist if the regulator is really caring about customer protection. Unbelievable scam banking system

[@wiseoldowlshow]

The regulator of the banks, OSFI, goal is to protect the banks.

[@chrisb5048]

Vince are you still going to do canadian news/market updates from time to time or will this channel be a straight up podcast? Either way i enjoy what you're doing. Thanks

[@wiseoldowlshow]

the updates will continue weekly on IG Live Thursday at 4pm and then edited for KZbin

[@sallofranco5940]

excellent topic and explanation. It has opened my mind to this option

[@wiseoldowlshow]

Glad it was helpful!

[@user-iy7nq8lw1c]

Thank you

[@wiseoldowlshow]

You're welcome

[@blackbellanow]

How are the payments optional? I feel like a lot is being said but I still don’t feel like the bank is being transparent. How much interest? How is it compounded?

[@wiseoldowlshow]

Clients of these products have the option to make payments or not. Interest can accrue to the balance or the client can make the payments. These products also have pre-payment options and terms that are similar to a traditional mortgage. Interest rates vary by term and change with the market which are slightly higher but less than private or alternative lender rates. At the end of the day, these type of products serve a purpose and they are life changing. Case in point, a couple in their 70's who experienced a life changing event when the husband suffered a stroke and partial paralysis. Costs to retrofit the home and Personal Care Workers was expensive and a reverse mortgage that had a line of credit feature provided assistance to help with covering the costs of the unexpected event. The home was paid for and CPP, OAS and nominal pension income would not have qualified them for any reasonable mortgage due to new mortgage qualifying requirements and stress tests. This product served a purpose in a difficult situation and this couple has no payments to stress about. This is one of many situations where this product has become a tool for Canadians deal with uncomfortable situations. If you want to learn more, feel free to reach out. Cheers, Vince

[@blackbellanow]

Hello Vince, Thank you for responding. Maybe in the next podcast give a detailed transparent example with cost of borrowing and how much is paid out to cancel/resolve the reverse mortgage. (With today’s rate.) I have heard stories in the U.S. where people had to sign over the house to the bank once their parents passed because there was no equity left once the interest was added. 100k costing 250k once broken down. It was so lucrative the banks would target particular neighbourhoods door-to-door. All very sad.

[@JimmyProLLC]

So predatory

[@wiseoldowlshow]

Without this product available, older Canadians would have to resort to private lenders and alternative lenders charging lender fees, broker fees, high legal fees and ridiculous interest rates that they would choke on with their limited income. Predatory? This product provides a viable option to Canadians to age in place and reap the benefits of staying in their community. With lack of housing options in general, what other options do they have? Please share some insight.

[@neovi6424]

This is just misleading and evil. Stay away from risky reverse mortgages. If you need money, sell your house and peacefully rent in your retirement. Reverse mortgage is the same thing with added market risk and interest payments to the bank that might put you on the street

[@wiseoldowlshow]

Thanks for the comment. The reality is some folks want to age in place. You have a misconception that a lender will force you out of the home. That is the furthest thing from the truth. It's important to get your fact straight.

[@Relaxlifeisshort2]

@@wiseoldowlshowyou are so correct people have to get educated on this. Reverse mortgage is not bad if done correctly

[@neovi6424]

@@wiseoldowlshow Just because some people may want something that is unknowingly harmful to them doesn't mean you should encourage it. You should be educating people against the risks instead of taking advantage of their ignorance. Also, your comment is misleading. It doesn't matter if the lender can't technically kick you out, if your home is your retirement nest egg and you exhaust it, you're on the street due to being unable to pay your bills. You're helping people rationalize bad financial decisions.

[@John-uc4he]

Why don’t you show with real values how the reverse mortgage will increase in debt. This would be a last resort option before living on the street. The reverse mortgage will eat at all the equity and this guy saying the borrowing rate is 6 to 7% that’s hard to believe. He sounds like a used car salesman!!!

[@wiseoldowlshow]

Do you believe that while interest accrues over the years that "eat at all the equity", the value of the home is frozen in time? I encourage you to educate yourself on the product and the maximum levels of debt it allows for an age specific borrower and better understand how the product actually works. Misconceptions, myths and stereotypes for this product are many and my goal is to help folks understand that it could be a tool to help those shut out from traditional bank mortgage qualification introduced with the Stress Test. The maximum that can be advanced is in the 25% to 55% range and it is based on age of the borrower. God forbid someone utilizes this product instead of a private mortgage from a predatory lender looking to line their pockets.

[@ow5229]

I am questioning your credibility now

[@wiseoldowlshow]

All because I'm sharing and educating people on the misconceptions of a financial tool that can solve problems for folks dealing with the high costs of living, unexpected health events and want to age in place. I'm not worried about your opinion. I have come across thousands of situations throughout my 30+ year career and helped folks to their satisfaction. The beauty of social media is you have a choice to unsubscribe and not spend your time watching what you don't feel meets your personal thresholds. Thanks for the comment. Cheers, Vince