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Roland Mackintosh, a Business Development Manager at HomEquity Bank, provides sound advice to Canadian senior homeowners before they opt for a CHIP Reverse Mortgage.

When a Reverse Mortgage Doesn’t Make Sense

In Canada, Reverse Mortgages are often recommended to clients and customers who are of a certain age, have a home they want to stay living in, and are in need of cash for reasons such as emergencies, home renovations, improving their lifestyle and even to alleviate the stress of debt through debt consolidation. But in the Reverse Mortgage industry in Canada, people often question the product as to whether it makes sense for their situation. The truth is, not every client should get a Reverse Mortgage. At HomEquity Bank, the provider of CHIP Reverse Mortgages in Canada, clients are often asked the question “What is the purpose of your loan?” In other words, what do you need the money for? HomEquity Bank makes sure that a customer is well aware of the loan they are taking out and also that a Reverse Mortgage makes the most sense for their situation.

At HomEquity Bank, there can be situations where a Business Development Manager (BDM) meets with a client and after speaking with them, a reverse mortgage is not recommended. “People often forget that Reverse Mortgages are a huge responsibility on a monetary standpoint and if it just doesn’t make sense for the customer, I would honestly tell them that I don’t recommend it” says Roland Mackintosh, a Business Development Manager at HomEquity Bank. Recently, Roland met with a customer where a reverse mortgage didn’t make sense:

–    Client is 65 years old, a recent widow, and owns a very nice $1.5M home in Oakville, ON
–    Annual income of $34,000, $200,000 RSP, 4 children, 6 grandchildren
–    She was approved for a $495,000 CHIP reverse mortgage based solely on her age & home value
–    The purpose of the loan: “to lend to her son to support his failing restaurant business”
 
While it is nice to be able to help out your kids, does it really make sense to use a $495,000 reverse mortgage to “lend” to a family member and support a failing business? On one hand, the restaurant may need a capital injection and turn itself completely around (think Gordon Ramsey’s Kitchen Nightmares!). On the other hand, if it fails, how will the son repay the $495,000 that he’s borrowed? In this scenario, the mom is now stuck with a reverse mortgage that is eroding the equity in her home. Sure, future home appreciation may take care of the interest, but it’s not guaranteed to, especially if she downsizes during a down-turn in the housing market. 

Any loan, line of credit, mortgage or reverse mortgage comes with risk. And the use of funds is critical to determine if borrowing money makes sense. In this case, it clearly did not. After advice from Roland, her financial planner and her lawyer, the mom decided not to lend her son the $495,000. 

Roland Mackintosh along with all of HomEquity Bank’s other BDMs are experienced and well trained to be able to decipher between a good or bad fit for a reverse mortgage . 
HomEquity Bank is the only Canadian Bank dedicated to exclusively servicing seniors.  

For more information on a Reverse Mortgage or to find out if a Reverse Mortgage is right for you, please call 1-866-522-2447 to speak to a HomEquity Bank Reverse Mortgage professional. 

To contact Roland Mackintosh or to find out more about Roland, visit http://www.homequitybank.ca/roland-mackintosh/

Joyce Wayne

Joyce Wayne has been writing about social issues, business and culture for forty years.

This year she is publishing her second novel, Last Night of the World, a spy thriller about Soviet spies operating in Canada during World War II. Joyce is also the author of The Cook’s Temptation. An award-winning journalist, Joyce is most interested in the stories of men and women trying to thrive in challenging circumstances.

Here, she is exploring matters relevant to the lives of retirees and soon-to-be-retirees facing the rapidly changing circumstances of the new retirement.

Joyce Wayne

Joyce Wayne

Author of the recently-released novel 'Last Night of the World',
Joyce has won many awards for her writing.

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