A diamond in the rough for homeowners 55 years and older

(Monday April 29, 2018)

Podcast Notes / Overview

(Music Intro)

Welcome to this breakaway episode of Mortgagenomics where we focus on HOME FINANCING SOLUTIONS and STRATEGIES.  In fact this is the very first one!  In these episodes…I’ll just give it an acronym, we’ll refer to them as “HFS episodes”…we will look deeper into mortgage products, but more specifically how they can be applied in real life situations and circumstances.  Pretty much outside the box type of thinking

And I want to remind you that any references that I may include in this talk will be available in the blog post of this particular episode which you can find at homefinancingsolutions.ca_forwardslash_blog…or you may have already connected with this episode through my blog already.

So today I want to talk about a particular strategy suited for clients aged 55 and older, but before I do, let me warm it up with some statistics about a demographic we are hearing a lot about these days, the baby boomers.  If you’re not already aware, this is the largest demographic in Canada, consisting of just over 9 million Canadians to be precise and ranging in birth periods from 1946 to 1964. 

Here are some hard facts about this group, kinda mind blowing stats:

• 260,000 baby boomers are retiring every year in Canada…that’s 5500 / week (or at least they’re supposed to be retiring, but apparently many are still working – some by choice, but many because they have to).  And this will certainly increase for an extended period of time at a rate of around 15-20% per year
• for those aged 65 and above, the average annual income is pegged at about $37,000/year…the average annual expenses exceeds that at ~$47,000.  The average senior in Canada is spending $10,000 more than they earn
• Further to that, only half of this group have accumulated savings over $200,000
• 35% have secured debt of over $110,000
• 80% of their net worth consists of their real estate…mainly their home
• In BC, seniors rank #1 in Canada with the highest debt load at $143,582
• The maximum CPP/OAS income peaks at ~$1300/m…so on average, ages 65 to 85 are scraping by with an average annual income of ~$27k (that’s right $27k…$10k lower then the overall Canadian average)
• On January 1, 2018, the Department of Finance (in Canada) introduced a mortgage qualification stress test and with a $27k income, a senior would qualify for ~$91,000.  And prior to the stress test rule is was marginally higher at $118,000. 

Needless to say, the message here is very simple…the average Canadian senior aged 65 to 85 carries a debt load between $100 to $150k…but the demoralizing takeaway is that their qualification power appears to be seriously diminishing…so much that many could not qualify for a loan equivalent to the actual debt load they perhaps intend to refinance.

There is a solution for this group and we are going to unravel the key qualification points after this short little break:

Commercial Break: (with Music accompaniment)

Just because you’ve been with your bank since the beginning of time, DOES NOT mean that you will automatically be granted discounted rates at your mortgage renewal time.  In fact, most of the time their offers (at renewal time) are not discounted, AT ALL.  So let’s think about that…let’s say you bank with the Big Blue Bank of Canada for the past 20 years, as you parents probably did before you…so, we’re talking a super long history of loyalty to your bank spanning – literally –  generations.  Now fast forward to your upcoming term coming up for renewal…in most cases, you can expect a letter of some sort mailed to you or even a phone call outlining a slew of rates and terms for you to choose from for your renewal.  And usually without hesitation, you select one and proceed to extend for another few years…only to later find out, you were simply offered a posted rate…that’s right, posted as in not discounted.

So now ask yourself, in exchange for your business and loyalty over the years…thats it? that’s all I get?  A posted rate? 20 years of my blood, sweat and interest payments…and you offer me a posted rate?  Oh, and you’ll through in a credit card with some travel affinity points? (which by the way you can get with any bank you have absolutely no affiliation with)  Right.

Tip of the day…always call a mortgage broker to explore your options, especially at renewal time.  Visit ME (marko gelo) at homefinancingsolutions.ca and call, text, chat or email me to discuss your options.  With one application, we are able to tender your mortgage to Canada’s top banks and have them FIGHT for your business.

We work for you, not the lenders.

End of Commercial Break

Ok, so before the break, we outlined the current state of the emerging baby boomer demographic.  $27k to $37k annual incomes, debt loads over $110k and diminishing mortgage qualification ability. 

So here’s the dilemma or fear…for those 55 and older:

• outliving your retirement funds (not enough cash to fund your lifestyle)
• not having funds for unexpected health care costs
• no money for home repairs, improvements and modifications
• not being able to financially help your children or grand-children
• I could go on, but you get the message here

So many of you may say, well I’ll just get a line of credit on the house and there you have it – problem solved! 

Not so easy though…if your income is not adequate you may have a tough time qualifying.  And secondly, you’ll be paying for the borrowing costs…so for every $100,000 in mortgage or home equity line of credit, you could be paying about $330 to $500/m.

Then there’s the worst case scenario…sell the house, thereby liquidating your equity and off you go.  Sounds accomplished and smart, but not always the right move for everyone…for many, the thought of selling their home and relocating or down-grading or -sizing could be an emotional and regretful experience.

So what if I told you there was a solution.  One that would allow you to stay in your home, access the equity in it, qualify without virtually any income requirements, and never make payments on it?

This is all possible, and more importantly…this home financing solution is available to every single Canadian over the age of 55 (that owns a home, of course).

Just imagine, you can choose to tap in to your homes equity in any way you desire; a single lump sum, monthly income payments or a combination of both.  All this and continued full ownership of your home, light qualification guidelines, no monthly payments and…tax free.  That’s right, when you access equity from your home to use for whatever purpose it is tax free.

The applications are endless for this strategy:

• you could compliment your existing taxable (RRIF) retirement income with non-taxable income from your home equity
• upgrade or improve your home with absolutely no borrowing costs
• assist your children with the purchase of their first home
• OR, use your equity to purchase a second home for yourself, a vacation home anywhere else in the world…and never make payments on it

So, absolutely no restrictions as to what you can do with the funds.  And most importantly, you are not forfeiting ownership of your home, nor are you tapping it out and using it like your very own debit machine.

If this peaks any interest to you or you think its something your parents or grand parents might be interested in, reach out to me and we can see explore if this is the right solution for you.  This would also apply to any real estate agents who may be listening in – forward this information on to your customers as it is becoming one of the best kept financing secrets to purchase a home….and that goes for any financial advisers listening in, as well.  The many applications of this concept can compliment any retirement planning strategy out there.

All it takes is a conversation on the phone or a quick email to gather some details about yourself and/or your spouse and then we’ll generate the numbers and let them speak for themselves.

Call me now. In Vancouver at 604-800-9593 or in Calgary at 403-606-3751 or toll free at 1-855-HFS-LOAN.  Or email me at gelo.m@mortgagecentre.com.

Looking forward to your call, and thanks for listening to a very special edition of Mortgagenomics Canada. 

I’m Marko Gelo, Talk to you again soon.