reverse mortgage strategies

1© 2015 HomEquity Bank. All rights reserved.

Helping Canada’s Fastest Growing Market Segment


HomEquity Bank

Founded in 1986 and became a Schedule 1

bank in 2009

Only provider of Reverse Mortgages in

Canada

Grew 23% in 2014


Demographic TrendsSeniors are the fastest growing segment of Canada’s population

• There are 5.0 million seniors (65+) and 8 million over 60

• For a 65-year old couple, there is a 1-in-2 chance that one of them will reach the age of 92

• There are approx 1000 people turning 60 every day in Canada

• 5.6 Million Homeowners in Canada are 55+ (42% of all Homeowners)

• 54% of Canadian retirees are still carrying debt

2010 2011 2016 2021 2026 20310.0

2.0

4.0

6.0

8.0

10.0

12.0

6.7 6.88.0

9.5

10.4 11.1

Mill

ions

Chart Source: Statistics Canada, Catalogue no. 91-520

Canadians 60 and over


Canadian boomers want to stay in their homes

91% of Canadian Seniors said they want to stay in their home or in their neighbourhood and live independently as long as possible.

“The propensity to move drops dramatically as people get older.”


In the absence of better solutions, retirees are forced to consider unfavourable options….

Selling and renting or

downsizing

Assistance from children

Restricting Spending

Depleting investments prematurely

Apply for a mortgage or line

of credit, but may not qualify

or want a monthly payment


Anyone on Title and both spouses (even if one is not on title) must be 55 or older

Own their home

Home must be primary residence

Valid and adequate fire insurance

Client Profile


Reverse Mortgage Unique Features and Benefits

For these reasons and more, a reverse mortgage with HomEquity Bank is a sound financial solution for many people

Payment Optional! – No payments are

required as long as 1 applicant

lives in the home

$

Limited credit and income

requirements, and No medical

check

Proceeds are tax-free

Penalties waived at death

Ability to unlock up to 55% of their home value into

cash(Depends on Age

and Property)

Funds can be advanced as needed, with interest only accruing on what’s been advanced

$


Two Product Options Available

Single Account Mortgage

Lump Sum Advances

Two Account Mortgage:

Lump Sum AccountPlanned Advance Account


Equity Preservation – CHIP Reverse Mortgage

The illustration uses conservative values: Home appreciation of 3.00%. Average home appreciation is 6.7% annually. (Source: CREA, Canadian Real Estate Association 15-year national house appreciation average, February 2014) CHIP interest rate of 5.69%. The Annual Percentage Rate (APR) is 5.79%, which is the total cost of borrowing expressed as a percentage for one year. The APR includes interest and closing costs. Income Advantage Planned Account with $500/month at the interest rate of 4.25. The Annual Percentage Rate (APR) for the Planned Advance Account is 4.25% which is the total cost of borrowing expressed as a percentage for one

year. The APR includes interest.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

Interest

CHIP Reverse Mortgage$300,000

Home Equity 52%$702,000

48%$360,000

67%$600,000

Mortgage balance


Income Advantage – with Initial Advance

The illustration uses conservative values: Initial Advance: $50,000 and Planned Advances of $1000 per month Home appreciation of 3.00%. Average home appreciation is 6.7% annually. (Source: CREA, Canadian Real Estate Association 15-year national house appreciation average, February 2014) CHIP interest rate of 5.69%. The Annual Percentage Rate (APR) is 5.79%, which is the total cost of borrowing expressed as a percentage for one year. The APR includes interest and closing costs. Income Advantage Planned Account with $500/month at the interest rate of 4.25. The Annual Percentage Rate (APR) for the Planned Advance Account is 4.25% which is the total cost of borrowing expressed as a percentage for one

year. The APR includes interest.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

Planned Advances andInterest

Initial Advance

58%$793,000

Home Equity

48%$417,000

88%$750,000 Mortgage

balance

$50,000


Peace of Mind

1 There is no required payment that could potentially lead to default and/or foreclosure

2 Approval is for life so there is no stress about having to requalify or have the mortgage suddenly called

3 If the spouse passes away, there is no re-qualification

4 Members will never owe more than the fair market value of the home at the time it is sold

5 If the rates rise, their payment is still $0

6 Once the limit has been used up, there is still no payment required.

For these reasons and more, a reverse mortgage with HomEquity Bank is a sound financial solution for many people


Client story #1 – Financial stress relief

67 year old widow with lung cancer

$350,000 home on ALR - $60,000 existing mortgage

3 years behind on property taxes = tax sale letter

Poor credit and income

No options other than private financing


Client Story #2 – Early Inheritance• 75 year old couple living in $1.2m Surrey home

• 3 children all going through hard times, so parents want to help (down payment, divorce, business capital)

• Options include taking out investments, taking out a mortgage, or a reverse mortgage.

• Were approved for $550k as a credit limit, advanced $325k, gifted $100k to each child as early inheritance, and kept $25k for fun. Still have access to $225k for anything else if ever needed.

• Easy to qualify. No payments to make. Tax free money. Kept investments in tact. Were able to give and help TODAY, instead of waiting until they eventually pass.


Client Story #3 – Investment Preservation

• 72 year old couple with some unexpected expenses to pay, plus finding they want more monthly cash flow

• Approach advisor to withdraw $70k from investments and increase RRIF withdrawals by $1000/mnt.

• House is $700k, mortgage free, so advisor suggests using tax free cash in home

• Approved for a reverse mortgage of $286k. Advanced $86k to start, and are taking auto-withdrawals of $1000 for 200 months


Client Story #4 – Lower Payments. Keep Benefits

• 64 year old widow on CPP, OAS & Survivor Benefit

• $504,000 home with $121,000 mortgage. Payment $248 bi-weekly

• Starts taking $600/mnt from RRSP

• Loses GIS and survivor benefit

• $197,000 Reverse mortgage saves the day

• Debt paid, investment preserved, pensions regained


Client Story #5 – Purchase with CHIP

• 68 year old lost her husband and is selling the large home

• Cleared $500,000 and is now shopping

• She finds a place for $500,000 that is perfect, but can’t afford a mortgage and doesn’t want to exhaust all her sale proceeds

• She is approved for a $190,000 CHIP, meaning she only has to put down $310k, and she has NO payment

• She kept $40kin the bank, and invested $150k for long term cash flow.


Other Common Reasons for a CHIP

$• Increase monthly cash flow in retirement

• Replace income from deceased spouse

• Keep up with rising costs as you age

• Activate all assets to reduce taxes and increase net worth

• Poor credit or low qualifying income

• Early inheritance to loved ones. Help with down payment to get 20% down

• Renovations or increased travel

• Purchase a vacation property/snowbird property.


Closing costs and fees paid by Client

Appraisal Costs $300+

ILA Costs*$300-$600

ClosingCosts

$0-$1495

* Including any other legal work required by client’s lawyer e.g.. Title issues


Next Steps

Your Team:

Identify Potential Clients Engage Follow Up

Over 55 with mortgages coming due

Over 55 with large secured debt amounts

Over 70 with mortgage payments

Discuss the Reverse Mortgage Product with your client and reach out if you have any questions.

Fill out a referral form for anyone who is interested

Schedule a check up meeting in 2-3 Months and keep in touch if you have anything you need! We are here to help you and your senior clients!

1 2 3

[email protected]

778.229.8555

www.chipadvisor.ca

BDM

RIS

Chris Hoeppner

Ziyad Iqbal


In our client’s own words…

When you sell your home you are living off the proceeds, all you are doing now is NOT selling your home and living off the proceeds.


Do you have any questions?

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