What Halifax Families Need to Know About Reverse Mortgages

Dan Ahlstrand and Rene Quercia, SVP Broker Channel at Homeequity Bank, discussed reverse mortgages and The Team Clinton event for parents and grandparents focusing on financial and retirement planning.

Dan Ahlstrand
As you well know, we do a monthly mortgage show here on the radio station 95.7 Newsradio, and it’s called Mortgage 101, and it’s co-hosted by me and by our mortgage guru, Clinton Wilkins. And this past month we had a focused the entire edition of the show on reverse mortgages, and and some of the some of the ins and outs, and to be quite honest, some of the questions answered about what these things are, we’ve all seen the ads on TV, right? We’ve seen Patty Levitt Reed on the commercials, we’ve seen Kurt Browning on the commercials, and I know a lot of you out there have questions about these, these reverse mortgages. Are they, are they trying to take my, my home away from me while I’m in it? What does this mean for my kids? Should I get involved in this? How do I unlock some of the equity that I built into my home? That’s what this is all about. So, I came across an event that Clinton, our mortgage guru, is putting on this coming Sunday. It is, it’s a two-hour event that is happening here in Halifax to provide some information for families, for parents, and for grandparents about these reverse mortgages or this CHIP program, and if it is the right fit for you. I am very pleased to welcome to the show today to tell us a little bit more the Senior Vice President of the Broker Channel at Home Equity Bank, and that’s Rene Quercia. Rene, how are you?

Rene Quercia
Hey, Dan, I’m doing great. How are you doing?

Dan Ahlstrand
Did I get it right? Is that kind of what we’re with the idea behind this, this information session is, to try to kind of take some of the mystique off of what a reverse mortgage is?

Rene Quercia
Yeah, absolutely. I mean, we host these types of sessions across the country; we’ve been doing it for a long time. There are a lot of myths, a lot of concerns, a lot of questions around the products, and honestly, we’re there just to help people understand, you know, it’s a product that’s not for everyone, but certainly there’s probably many more people that could benefit from it, and maybe just don’t know about it, and so we’re here to help.

Dan Ahlstrand
Rene, the biggest question that I hear from people about these, after we’ve seen the commercials, everybody has seen the commercials on TV, is, you know, am I, am I signing over ownership of my home to a bank? Is that what happens?

Rene Quercia
No, not at all. I mean, it is really more like a traditional mortgage, you know. We take a charge against the house, but the amounts that we lend against the house, what’s called the loan-to-value, is actually quite conservative. So, depending on the client’s age, we could lend up to 55% but we rarely get that high, and so what that means is, really, if your house is worth 500,000 for instance, and we lend you 250,000 there’s still plenty of equity left in the house, and it’s a charge on the house, which means if you sell the house at some point, you pay us back, the house is always yours, I mean, it’s not, we don’t, we don’t take it in any way.

Dan Ahlstrand
What does it mean for my kids if I’m deciding on taking advantage of some of this, this reverse mortgage? What does it mean for my children when I pass?

Rene Quercia
From an estate perspective, you know, the house would be sold like in any other situation, and if there’s a balance owing to us in terms of the mortgage that would need to be paid off, and then whatever residual equity is there is for the estate or the family to divide, and I mean we always recommend that you know folks considering this product actually discuss with their adult children, because it is a consideration, I mean, some adult children like to get involved with their parents, you know, state plan, and others don’t, but it’s definitely a conversation for around the table, and it’s something that, you know, should be considered and spoken with everyone.

Dan Ahlstrand
Rene, if my parents, or my mother, or my grandmother, or whoever gets into a reverse mortgage and takes some of that equity out, and then wills me that house or if I decide that that’s something that I want. How does that all work?

Rene Quercia
Yeah, essentially, if you know your parent dies and the house is left to you as an estate, then at some point you sell the house, and when you sell the house, that part of the mortgage needs to be repaid, so the mortgage that’s outstanding with us, and whatever equity is left is yours, obviously, to do what you like with, so that’s that’s pretty standard, I mean, that’s there’s nothing unique about that or different about it, pretty straightforward.

Dan Ahlstrand
It’s dependent on each case, I would assume, but it’s a lengthy process to get this done, or can we get money from this reverse mortgage very quickly?

Rene Quercia
Well, if you know, if you have parents, or if you’re older and you’re considering taking a reverse mortgage, you know the process itself is actually quite simple. We don’t really ask for a lot of documentation, we do an appraisal of the house. To ensure that we’ve got an accurate value, we obviously look at your age and we determine how much we think we can lend based on your age, and then it’s a process where we submit, like someone like Clinton, for instance, a mortgage broker would submit an application, it gets approved, and it goes through to funding, where you’ve got to engage with a lawyer. We also require independent legal advice. It’s a second step in the legal process to ensure that the client really understands, you know, the nature of the instrument, and that they’re comfortable with it. You know, all in all, it could take two to three weeks, you know, from a timing perspective.

Dan Ahlstrand
And I think you mentioned this earlier. This is a conversation that one likely should have with all of their family members rather than doing this themselves, so there are no surprises when the eventuality happens.

Rene Quercia
Yeah, for sure. I mean, that is important. I’m an adult child of parents, and I’ve seen them kind of scrimp and save, and you know, buy a house and do what they can, and in retirement, I mean, with inflation being what it is today, sometimes you see your parents suffering a little bit, maybe they’re not spending the way they would like to spend, and for some adult children, they say, look, why are you living that way as your children? Maybe we can support you, or maybe if you’ve got equity in your house, we could look at a reverse mortgage. I mean, there are a lot of options out there, and we do see that folks are getting these mortgages now for more reasons than just when things are tight from a cash flow perspective. In fact, we have many, many clients now across the country that are gifting money to their adult children to help them buy their first home, to maybe pay for an education, to you know, to do something where they can, as a parent, you can see the fruits of your labour, so to speak. You can see that they’re benefiting from the equity that you’ve built in your home. We call that a living legacy, and it’s been a really nice twist to, you know, the way people use this product. It’s been really encouraging to see across the country.

Dan Ahlstrand
Everybody will have all kinds of questions about this. This is why Clinton’s putting on the show, calling it an afternoon for parents and grandparents. It’s to get together to answer some questions, to get together as a group, and a representative from Home Equity Bank will be there to share information about the Canadian Home Income Plan, reverse mortgages, and hopefully have all of your questions answered. It goes from two to four. It’s happening at a brand new restaurant there on South Park Street. It’s called Public. If you want more information, folks, or if you want to take part, the best way to do that is to log on to Teamclinton.ca/radio, and all the information is there. It’s a free event, doesn’t cost you anything, and it may answer some of your questions, whether this is the right product for you or not. Really appreciate your time, Rene.

Rene Quercia
Thank you, Dan.