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2180 Steeles Avenue West,
Suite 204, Concord,
ON, L4K 2Z5

Phone:     905-761-7001
Toll Free: 1855-761-7001
Fax:          905-761-7005

Email: mortgageadvisor@rogers.com





25 June 2019

Balances on reverse mortgages showed a more than 28% increase

Forget about HELOCs, as Canadian seniors have a new popular method to use their properties as a cash source. According to the Office of the Superintendent of Financial Institutions (OSFI), the balance of reverse mortgage debt rose sharply in April, reaching a new record high level and showing a more than 20% growth.

As you know, reverse mortgages provide senior homeowners with a possibility to get a part of their home equity out without selling the property. Borrowers can pledge their home for a lump sum loan or regular payments. It’s similar to HELOC, but you don’t need to make payments, as they are necessary only in case of moving, home sale, borrower’s death or default.

In exchange for it, you receive a slightly higher interest rate than in case of a usual HELOC.

In April, the outstanding balance for this type of credit reached $3.66 billion, marking a 1.24% annual increase. It’s also 28.15% higher than in April 2018. Such an increase came amid other credit sectors showing much lower results.

The balance of reverse mortgage debt reported a new record high level, while the growth still was slower. Although the balance isn’t so big, it’s important to understand that this product was created for higher than typical growth. As seniors often depend on fixed incomes, and they don’t have to make payments, the paying off issue could by tricky. Canada’s population ages, so we’ll see more seniors with less cash but expensive homes moving towards this sector.

 

 

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