Demand for reverse mortgages among citizens in Canada continues to grow, demonstrating a contrast to the trend of the business sector in the United States. As of October 2018, the annualized pace of reverse mortgage debt growth is now at $3.425 billion CAD (roughly $2.6 billion USD), the highest level it has been in nearly eight years, according to filings by the country’s Office of the Superintendent of Financial Institutions (OSFI).
“Canadians sent the balance of reverse mortgage debt soaring,” said Canada-based real estate publication Better Dwelling, which first reported the reverse mortgage balance data. “The balance represents a 57.46 percent annualized pace of growth, a huge jump from last year. Actually, it was a huge jump from any point – setting a new record,” the publication wrote.
Better Dwelling also observed that the monthly increase – in addition to being the second largest observed jump based on eight previous years of available data – is also 844 percent (that’s not a typo) larger than the median monthly pace of growth. The recorded annual increase is also the largest observed in eight years, and 274 percent larger than the median pace.
“It almost looked like Canadians were slowing down, but it made a massive increase instead,” Better Dwelling wrote.
Reflecting the general health of the Canadian market is the amount of new originations at one of Canada’s largest lenders. HomeEquity Bank, a provider of the CHIP (formerly the Canadian Home Income Plan) Reverse Mortgage product, reported $767 million CAD in reverse mortgage originations for full year 2018, marking a 26 percent increase over 2017 figures.
“These strong 2018 results reflect a significant increase in HomeEquity Bank’s mortgage broker and bank referral business, as well as continued consumer interest in the product as a reliable resource in their retirement planning and financial toolbox,” HomeEquity said in a press release announcing these results.
“We are extremely proud of our results achieved in 2018, with our fifth consecutive year of 20 percent plus year over year growth,” added Steven Ranson, HomeEquity president and CEO in the press release. “Canadians are living longer and more fulfilled lives in retirement and they consistently share with us their desire to age in place.”
There are several distinctions between Canadian and American reverse mortgage products, according to Canadian reverse mortgage resource ReverseMortgagePros.ca.
For instance, the qualifying age for applicants in Canada is 55, compared with 62 for Americans. In the United States, it’s only required that one spouse qualify, while both spouses are required to qualify in Canada. Canadian applicants also must obtain independent legal advice before they will be approved for the product, and this is not a requirement in the U.S.
There are also key similarities between the products in both countries. These include the inability to use a reverse mortgage to take out more than half the equity in your home, the requirement to not have any outstanding mortgages, property taxes or other loans against the home in order to receive proceeds, along with not needing to make any monthly payments towards the loan.