canadian reverse mortgage Archives - Ira SmithTrustee & Receiver Inc.

Introduction

I first want to wish all of you and your families a healthy, happy and prosperous New Year. As 2019 draws to a close, I thought it would be interesting to do some research in my 2019 Brandon’s bankruptcy blog to see which ones were the most top 10 popular this year.

So, in order counting down from number 10 to number 1, here are my top 10 bankruptcy blog counts for 2019.

#10 – 407 ETR DEBT SETTLEMENT: OUR NEWEST GUILT FREE WAY TO DO IT

This was a blog I wrote in 2015 as a follow up from one in 2014. It was updated for a 2018 Court decision.

In January 2014 in our blog titled 407ETR FAIRNESS-ONTARIO COURT OF APPEAL ENSURES FRESH START I described to you the decision of the Court of Appeal for Ontario in 407 ETR Concession Company Limited v. Superintendent of Bankruptcy (In the Matter of the Bankruptcy of Matthew David Moore) (the Moore Decision).

The highway’s owners appealed that decision to the Supreme Court of Canada (SCC). On Friday, November 13, 2015, the SCC released three decisions all dealing with the same basic issue: does the federal Bankruptcy and Insolvency Act (BIA) take paramountcy over provincial laws purporting to deal with the issue of debt and bankruptcy in Canada. The SCC answer was a resounding YES!

This blog talks about how 407etr deals with the debt owing by an insolvent person filing either a consumer proposal or for bankruptcy.

#9 – SOMETIMES EVEN A SHARK NEEDS BANKRUPTCY AND INSOLVENCY HELP

Not every innovation that is seen on The Shark Tank is bound to be one of the very best. Among the winners, one just entered into bankruptcy and insolvency proceedings. In this blog, I described one such company that got a deal on Shark Tank, but ultimately, went into bankruptcy.

Fizzics is a machine that makes use of sound waves that improves the taste and quality of a beer. Not even a Shark can stop its company from being driven to Chapter 11 bankruptcy protection. This proves that often an ingenious and fantastic invention being marketed with the assistance of a Shark might not truly interest people.

#8 – COURTS OF JUSTICE ACT: COURT OF APPEAL FOR ONTARIO CREATES NEW RULE?

This was a June 2019 blog about a then-recent decision of the Court of Appeal for Ontario that raises certain issues for a Receiver appointed under the Ontario Courts of Justice Act. The question answered in this blog which I focussed on was does the appeal period in the BIA or the Courts of Justice Act, regulates the appeal period from the order of the motion judge in this situation?

#7 – GAMBLING DEBT BANKRUPTCY: CAN GAMBLING DEBT BE DISCHARGED IN BANKRUPTCY?

I am often asked if you can have a gambling debt bankruptcy; can gambling debts be discharged in bankruptcy? In that January 2018 blog, I discussed the issues and provided my views on how best to get a discharge from not only gambling debts but debts related to any addiction.

#6 – CANADIAN REVERSE MORTGAGE: SENIORS MOVING FORWARD WITH INCREASED DEBT

In this August 2019 blog, I discussed the issue of how seniors are flocking to the Canadian reverse mortgage product in record numbers. I described what seniors must know to avoid reverse mortgage problems.

#5 – PRENUPTIAL AGREEMENTS MAKE FAMILIES STRONGER: THEY AREN’T JUST FOR THE RICH & FAMOUS – PRENUPS IN ONTARIO ARE FOR YOU TOO

In this July 2017 blog, I wrote about how prenuptial agreements make families stronger and why anyone can benefit from prenups in Ontario.

#4 – FORM 31 PROOF OF CLAIM: HOW TO COMPLETE THE PROOF OF CLAIM

This blog is from October 2018. I discussed how a form 31 proof of claim form should be completed and discussed why it is important for it, and the related proxy, to be completed properly.

#3 – 40 PARK LANE CIRCLE, 44 PARK LANE CIRCLE TORONTO FOR SALE: ARE FINANCIAL PROBLEMS CONTAGIOUS?

This March 2015 blog asked somewhat tongue in cheek if financial problems could be a result of where you lived. I reviewed some high profile insolvency cases by residents of 40 Park Lane Circle and 44 Park Lane Circle in the toney Bridle Path area of Toronto. I also provided some solutions people could use to solve their own debt issues.

#2 – WHAT HAPPENS TO DEBT WHEN YOU DIE CANADA: ARE YOU FREE OF DEBT

This was a June 2018 blog. In it, I explored what happens to debt when you die in Canada. Does debt survive death or not?

#1 – AVERAGE CANADIAN NET WORTH 2018: MIDLIFE WEALTH SHOCK MAY LEAD TO DEATH

This September 2018 blog looked at household debt at an all-time high, making the average Canadian net worth 2018 is a hot topic. My blog explored a then-recent study showing what could happen if we experience wealth shock.

Bankruptcy blog conclusion

You may have already noticed over the last 10 days or so I have slowed down a bit in the writing of my Brandon’s bankruptcy Blog. The holiday period will do that to me! I will continue in January at a slower pace of blog posting. Come February, I will pick up the pace again.

In the meantime, again, I wish all of my loyal readers and their families a healthy, happy and prosperous 2020.

Introduction

I recently read an article that said seniors are taking on Canadian reverse mortgage debt in record numbers. In fact, this year, it is one of the fastest-growing debt products.

On April 30, 2018, I published Brandon’s Blog titled “CANADIAN REVERSE MORTGAGE INFORMATION: EASY TO LOSE THE HOUSE IF YOU DON’T UNDERSTAND THE TERMS”. That blog was about an Ontario court case. It showed how easy it is to lose your home to a reverse mortgage lender. Even easier than if you go into default on a traditional mortgage.

I doubt that many of the seniors using this type of debt to raise money fully understand all of the issues, including reverse mortgage problems. The purpose of this blog is to answer the most asked questions about this kind of debt.

How does a reverse mortgage work in Canada?

A http://www.irasmithinc.com/blog/what-happens-to-mortgage-when-you-die-canada/Canadian reverse mortgage is financing that permits anyone of the age of 55+ to obtain a loan from your home equity without having to sell your home. The loan is secured by way of a mortgage against your house. This is often called an “equity release”. You have the ability to get up to 55% of the present worth of your home. The actual percentage and dollar value you will have the ability to borrow depends on your age, your residence’s assessed value as well as the lending policies of your lender.

You do not need to make payments on a reverse home loan up until it is due for repayment. This is normally when you vacate your house, it is sold or the last borrower passes away. No payments do not mean the same as no interest. Interest accrues on a reverse home mortgage.

The longer the loan is outstanding, the more time you go without making payments. Therefore, the longer the interest accrues. This obviously reduces the equity in your house.

This is how this type of loan works.

What is the interest rate on a reverse mortgage in Canada?

The interest rate is but one cost of getting a reverse mortgage loan. At the time of writing this blog, the current annual interest rate on this type of loan is in the 5.5% to 5.7% range. This is obviously more than a traditional home mortgage today. This is obviously more than the interest rate on a traditional home mortgage today.

In order to set up such a loan, you will also need to pay for an appraisal fee and an administration fee. Right now that seems to be in the $1,500 to $1,800 range. You will also be responsible for the legal fees involved in preparing and registering the mortgage.

What is the downside of a Canadian reverse mortgage?

There are both advantages and disadvantages to this type of mortgage loan.

Advantages

You don’t need to make monthly payments.
You can turn some of the worth of your house into cash, without needing to sell it.
There is no tax to pay as a result of getting the cash.
This loan does not impact the Old-Age Security (OAS) or Guaranteed Income Supplement benefits seniors may receive.
You still own and live in your home.
You may have options as to when and how you get the money.

Disadvantages

Rates of interest are more than traditional home mortgages.
The equity you hold in your house will decrease as the interest on your home loan accumulates throughout the years. Depending on what happens to the market value of your home over the years, your home equity may decrease.
Your estate will have to repay the loan with interest in full within a set time period when you die.
The time needed to clear up an estate may be longer than the length of time permitted to repay a reverse home loan.
There might be less money in your estate to entrust to your children or other beneficiaries.
Expenses connected with a reverse home mortgage may be higher than a routine mortgage or other methods of financing.

Who offers reverse mortgages in Canada?

There are two lenders offering these loans in Canada: Canadian Home Income Plan (CHIP) and Seniors Money Canada. It is normal to go through a mortgage broker. However, HomeEquity Bank does also offer the CHIP product.

Why are seniors flocking to this type of debt?

A reverse home mortgage is not a new-fangled principle or invention. Actually, reverse mortgages have been around in Canada since 1983. But it’s just in recent times, as many senior citizens are desperate to find a means to fund their retired lives, that reverse home mortgages have become much more popular.

Financing one’s retirement has come to be progressively harder for many seniors. Pension plans are going away and also OAS and Canada Pension Plan (CPP) do not provide ample funds for today’s retirees. This is the main reason seniors have actually sought Canadian reverse home loans.

Many seniors with residences are house rich yet cash money poor. They’ve discovered that a reverse mortgage is a way to get the necessary cash to fund their retirement by using the equity in their home. As a retiree, they can no longer meet the income test to get traditional mortgage financing. So, the reverse mortgage solves that problem.

Senior Borrower Beware

I would be remiss if I did not provide a warning. A large proportion of reverse mortgages are arranged through mortgage brokers. Like any other financial professional, there are great ones, good ones, and not so good ones. Seniors are also more susceptible to scammers. So, it is always good for a senior to have a trusted advisor involved in the reverse mortgage loan process.

To start, there are some basic questions that every senior should ask BEFORE committing to a reverse mortgage loan. They are:

What are all the fees involved with this borrowing?
How the cash is actually paid to you?
What is the annual rate of interest charged?
Is there any type of extra charges if you sell your house within a certain period of time?
Just how much time you or your estate will need to pay off the loan if you need to sell your home or die?
What happens if it takes your estate longer than the specified amount of time to completely pay back the loan after your death?
What occurs if the amount of the funding plus interest winds up being greater than your home’s worth when it’s time to pay the loan back?
What are events of default?
If I default on something, like not paying my property taxes on time, what happens?
If such a default happens, will you lose your home?
Are there any other terms of the loan agreement that you must know?

It is important that seniors know the answers to these questions before signing on the dotted line!

Summary

Do you have too much debt? Before you get to the stage where you can’t make ends meet and you have to borrow against the equity in your home, reach out to a licensed insolvency trustee (formerly called a bankruptcy trustee). In fact, if you realize that you can’t pay your debts heading into retirement, contact us.

We understand the pain and stress too much debt can cause. We can help you remove that pain and solve your financial problems given immediate action and the right plan.

Call Ira Smith Trustee & Receiver Inc. today. Make an appointment with one of the Ira Smith Team for a free, no-obligation consultation and you can be on your way to enjoying a carefree retirement in your home Starting Over, Starting Now. Give us a call today.