The surge of positive news about reverse mortgages north of the border continues, this time with a personal finance columnist at a major Canadian newspaper telling readers to ditch their reluctance and embrace home equity as a potential retirement strategy.
“It’s time to take a fresh look at the reverse mortgage and get over the common view that it’s a last resort or a short-sighted measure,” writes Rob Carrick in a Tuesday column for The Globe and Mail, a Toronto newspaper.
As RMD has reported in recent weeks, Canadian homeowners have only a single lender option for reverse mortgages, the Toronto-based HomEquity Bank. While Carrick admitted that HomEquity’s $459 million in reverse mortgage loans in 2016 remains a relatively small piece of the overall Canadian mortgage marketplace, he notes that it represents a 26% increase over 2015 — and the lender has reported a year-to-date increase of 35% so far in 2017.
HomeEquity CEO Steven Ranson gives Carrick some interesting statistics about the types of borrowers who take advantage of his company’s services, noting that people with homes valued at $3 million or more account for a full 20% of its customers, along with 30% to 35% of borrowers who use a reverse line to pay down debts.
“They’re not really keen to lower their lifestyle expectations,” Ranson told Carrick.
In an opening that will likely bring a smile to the face of an American Home Equity Conversion Mortgage professional, Carrick describes reluctance to tap into home equity as a distinctly Canadian phenomenon, chalking it up to the country’s “conservatism with money.” But he also points out the cognitive dissonance inherent in avoiding reverse mortgages while taking advantage of other loan products, including loans that remain popular in the United States as well.
“Our less cautious attitude to money can be seen in ever-rising household debt. We’re also buying houses at prices that are way out of sync with our incomes, and swapping out bonds and GICs [a kind of CD] in our investment portfolios for riskier but higher-yielding dividend stocks,” Carrick writes. “Somehow, using the equity in your home for your retirement is resisting this erosion of the old ways with money.”
Read Carrick’s full column, headlined “Time to get over our squeamishness about reverse mortgages,” at The Globe and Mail.
Written by Alex Spanko