Gelderman.ca Fraser Valley Real Estate : 2019-02-10

Wednesday, February 13, 2019

What Are Reverse Mortgages

Financing your home is probably one of the least fun aspects of home ownership. Nevertheless, it’s essential. And when it comes to a reverse mortgage, things get a little more interesting. With a reverse mortgage, you can take advantage of the value of your home without selling it. Sounds pretty good, doesn’t it? Before you call your bank, here are all the facts about how reverse mortgages work.

What is a Reverse Mortgage?

Reverse mortgages are also referred to as equity release. They allow you to borrow a percentage of the current value of your home. This percentage is based on a number of things including your age, the appraised value of your home, and your lender. Basically, the older you are and the longer you’ve had your home, the more equity you will have in your home. As well, current market trends will also contribute to the amount of money you can access.

How is a Reverse Mortgage Paid Off?

One of the things that appeal to homeowners is that payments on reverse mortgages are not required until the loan is due. The loan is usually due at the time of death or when you sell your home. One thing to consider is that the longer you go without payments toward a reverse mortgage, the more interest you will owe. That is very important because this can negatively affect the equity in your home, meaning when you decide to sell, you might not end up with as much profit as you were expecting.

Is Everyone Eligible for a Reverse Mortgage?

Not everybody is eligible for a reverse mortgage. In order to apply for a reverse mortgage, you must:

Own your home, which must be your primary residence
Be at least 55 years old if you are single
Both be at least 55 years old if you own the home with a partner/spouse
Both be on the mortgage application if you own the home with a partner/spouse
Pay off your mortgage once you receive a reverse mortgage

How Do I Qualify for a Reverse Mortgage?

There are a number of things the lender will consider for reverse mortgage applicants including:

Where you live
The appraised value of your home
The type of home
The condition of your home

It is also not uncommon for a lender to ask you to speak to a lawyer. They want to ensure you know the answer to the question, “What is a reverse mortgage?”

Reverse mortgage lenders in Canada include:

HomeEquity Bank, which offers the Canadian Home Income Plan (CHIP) available across Canada.
Equitable Bank, which offers the PATH Home Plan through mortgage brokers in Alberta, British Columbia, and Ontario.

How Do I Access My Money Once I Qualify?

Once you qualify for a reverse mortgage, you are required to pay off your mortgage as well as close outstanding loans or lines of credit that are secured by your home, which includes your mortgage as well as a home equity line of credit. That might sound scary, but you use the money from your reverse mortgage to pay everything off. The balance of your reverse mortgage can then be used for whatever you like.

The money can be accessed in the following ways:

A one-time lump sum
Taking an amount up front and then receiving the rest in installments

Are There Fees or Restrictions with a Reverse Mortgage?

Before you decide how you want to access your money, discuss your options with your lender. There could be fees and restrictions in some cases. For example, in most cases, you will not be able to use your home to secure another loan or apply for a home equity line of credit. Also if you decide to pay off your reverse mortgage early, there might be a fee.

Other fees and costs can include:

A high interest rate
Home appraisal fee
Setup fee
Legal fees

How is the Money Repaid with a Reverse Mortgage?

Reverse mortgages do not have regular payments. However, interest will be charged to the original loan amount until your loan is paid in full. Interest will continue to increase the loan amount over time, which is very important to keep in mind. When you sell your home, or you no longer use your home as your primary residence, you will be expected to pay the entire amount owing.

You do have the option to make payments towards the principal and interest at any time. As mentioned, if you choose to pay in full, there is usually a fee. If you default on the loan, you will be expected to repay the amount in full. Defaults could include:

Using the money for something illegal
Lying on your application
Allowing the value of your home to decrease due to negligence
Not adhering to the conditions of your reverse mortgage

Upon the sale of your home or death, the entire amount will have to be paid off. The time allowed for the complete repayment will vary. For example, your estate might have 180 days to repay while if you were to move from your home, you might have as long as a year.

Pros and Cons of a Reverse Mortgage

Before you approach a lender, consider the pros and cons of a reverse mortgage.

Pros

No regular loan payments
You can live in the home
Don’t have to sell your home

Your loan is tax-free
No effect on Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits
Options on how you receive the money

Cons

High interest rates
Building interest can reduce the equity in your home
Your estate will have to repay the loan and interest in full when you die
Estate settlement time could be longer than the time given to repay
Less money to leave to your children and beneficiaries
Higher costs than a regular mortgage or other loan options

Important Questions to Ask Your Lender

If you do decide to meet with a broker or lender, ask these questions:

How do I access my money?
What are the fees and penalties?
What is the interest rate?
Are there time restrictions on when I can sell my home?
How long does my estate have to pay off the balance?
What if the amount of the loan is higher than my home’s value when the loan is due?

So now you know the answer to the question: “What is a reverse mortgage?” Keep in mind there are other ways to access the equity in your home. Always be certain you have the full story and understand the pros and cons of a reverse mortgage before you proceed.

Gelderman.ca Real Estate Team
RE/MAX Aldercenter Realty

www.gelderman.ca

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Tuesday, February 12, 2019

How much is my house worth?

One of the many benefits of owning a home is having the ability to sell it one day – hopefully for a healthy profit, which can then be leveraged to purchase a larger home, an investment or recreational property, or help finance your retirement. Once you decide that you’re ready to take the leap and list your home for sale, the next question you need to ask is, “How much is my house worth?” This is a loaded question indeed. It opens the floodgates to a slew of other factors that will each impact your decision on asking price to varying degrees.

The Price Is Right

We can’t stress the importance of setting the right asking price. An overpriced home runs the risk of sitting (and stagnating!) on the market for a prolonged period of time. This can seriously hurt your bottom line, especially if you’ve already purchased another home and you’re paying two mortgages simultaneously. Beyond that, overpricing your home could make competing listings look even more attractive. And oftentimes, fixing the issue isn’t as simple as just re-listing the home at a lower price. Buyers who are shopping the market will have already seen your listing, and they will either discount it as old news, or they may wonder what’s wrong with the property, in light of the price reduction. An overpriced home is not an ideal situation to find yourself in, in any selling scenario. On the flip-side, underpricing your home means leaving money on the table. Setting the right price from the get-go will ensure your listing attracts serious buyers, and some feasible offers too.

So, how much is my house worth? Let’s find out.

MARKET CONDITIONSIs it a buyer’s market or a seller’s market? The real estate market is impacted by everything from the local and larger economic picture, to the weather. The type of market speaks to demand for homes, which will affect how quickly your home sells and will help answer the question, “How much is my house worth?” A buyer’s real estate market is characterized by more homes for sale than people to buy them. An influx of listings (or fewer homebuyers) means buyers face less competition in the purchasing process, and can often take their time and see more homes before making an offer. Buyers also have greater negotiating power when it comes to their offer and conditions of the sale.

THE COMPARABLESIf you’re not sure what your home is worth, have your real estate agent pull comparable sales to help answer the million-dollar question (depending on the market, of course!) “How much is my house worth?” This will give you an idea of what homes in the same neighbourhood have sold for in recent weeks. This is a realistic reflection of what buyers have actually paid for similar homes in the same area. It’s also prudent to keep an eye on your competition. Pay attention to homes for sale in your neighbourhood, their condition and features, and the asking price – but take it with a grain of salt. Depending on the seller’s strategy, they could have listed low in an attempt to attract more potential buyers.

READ MORE: Selling In A Buyer’s Market

THE LOCATIONA home’s location has a huge impact on its value, and rightfully so. It’s a particularly important consideration for buyers, as location is one thing you definitely can’t change about the home. Location will define the liveability of the neighbourhood, the price buyers need to pay to get into the area, and the resale value when it’s time to list it. Translation: hot neighbourhoods are always a hot commodity, oftentimes trumping market conditions.

Monday, February 11, 2019

Single home buyers hesitant to purchase, despite strong financial means and low debt

Twenty-six per cent of single Canadians are considering purchasing a home on their own, with Atlantic Canada leading the pack at 34 per cent
Fifty-two per cent of single Canadians said economic uncertainty and expensive home prices are the biggest factors impacting their decision not to purchase a home on their own

As Canadians’ household debt ratio creeps higher across the country, single Canadians who are interested in buying a home on their own (26 per cent), seem to be on a different path. According to a recent RE/MAX survey conducted by Leger, almost half of respondents (43 per cent) have less than $5,000 in debt, casting doubt on claims that debt is impacting their decision to purchase a home.

For more than half of single Canadians, the decision not to purchase is driven by economic uncertainty and high home prices (52 per cent). Meanwhile, 81 per cent of singles who want to purchase a home say that they have the ability to do so and finance a property on their own. More than one-third (37 per cent) of single home buyers will use a loan or mortgage, and 35 per cent have the savings available to make the down payment.

“It’s concerning to see qualified buyers showing hesitancy toward home ownership. Price and economic factors aside, the additional unnecessary layers of government intervention have left many feeling pushed out of the market, or uncertain of it,” says Christopher Alexander, Executive Vice President, RE/MAX of Ontario-Atlantic Canada.

However, despite these factors, it’s important to remember that buying Canadian real estate is still one of the safest and most reliable financial investments one can make.

Single Canadians who want to buy a home are in agreement, with 38 per cent saying it is a good investment, which is especially the case for those living in urban areas (51 per cent). The second most-common reason for single Canadians wanting to purchase a home is to have more flexibility in their living space (27 per cent).

“Purchasing a property alone often reaps great long-term benefits from an investment perspective,” says Elton Ash, Executive Vice President, RE/MAX of Western Canada.

There is a great opportunity for asset growth, particularly as home prices continue to increase in cities like Toronto and Vancouver, pushing the average sales price up in all surrounding regions as well.

Key findings from the 2019 RE/MAX Single Home Buyers Omnibus Survey

Canadian single buyers are more interested in purchasing single-detached homes (12 per cent), than any other type of property.
Men are twice as likely as women to say that they are considering purchasing a home on their own (37 per cent versus 17 per cent).
Single Canadians living in urban areas are more hesitant than single Canadians living in suburban areas to invest due to high home costs (48 per cent versus 43 per cent).