Mortgage 101 – Making Financial Freedom for Retirees

Todd Veinotte and Clinton Wilkins welcome Trevor Gordon, Business Development Manager at Home Equity Bank, to discuss reverse mortgages, the misconceptions about reverse mortgages, and the HST cap for new home construction in Nova Scotia.

HST Cap for New Home Construction

Todd Veinotte
Welcome back to Mortgage 101, your guide to home ownership with Clinton Wilkins and me, Todd, before we get to our guest, a little housekeeping on the news that we talked about.

Clinton Wilkins
1.5 is the cap for the HST for new home construction, that’s good.

Todd Veinotte
1.5, which adds up to about 200 or 300 bucks a month.

Clinton Wilkins
Yeah, it’s big money, and I think we need so much new construction here in Nova Scotia. But the one thing that we have is land. That’s one thing that they don’t have in Toronto. I can tell you.

Todd Veinotte
Let’s try another thing that they don’t have in Toronto is our guest. Trevor Gordon, Business Development Manager at Home Equity Bank. Home of the CHIP: reverse mortgage. Trevor, welcome to the show, my friend. When it comes to a home equity, or rather the reverse mortgage, is something that’s been around for quite a while. Give us a little history lesson if you will.

History and Evolution of Home Equity Bank

Trevor Gordon
Home Equity Bank used to be CHIP Reverse Mortgage, right? And back in 2011, Home Equity Bank got its scheduled one-bank license. So the name switched from CHIP Reverse Mortgage, and CHIP stands for the Canadian Home Income Plan. So we got our schedule one bank back in 2011, and since then, we’ve been operating as a schedule one bank. But we’ve been around for over 30 years, providing reverse mortgages to retirees across Canada.

Clinton Wilkins
It’s such a hot topic right now, Trevor, and I’m so glad that we’re having you on. We’ve touched on this before. I don’t have a huge amount of experience. Previously, I’ve been service certified with a CHIP, so I know a few things about it, and we do have a lot of senior clients. We have something like 40,000 clients in my practice, so we see a lot of people every single day. But this is a niche where I think it’s becoming more and more and more important. There are so many retirees that their biggest asset is their home, and they’re also living paycheck to paycheck in terms of, they’re living on CPP, OAS, and they’re struggling just to stay in their home.

Trevor Gordon
Yeah, Clinton, you and I have been working together in this industry for over 20 years. This year, I’ll be celebrating my eighth anniversary with Home Equity Bank. Time flies. I have to tell you where I was eight years ago, to where I am today. And, I got the role with Home Equity Bank, and I was saying to myself, “Oh, this is fantastic!” One product, it’s going to be easy to sell and easy to know all the aspects of it. I don’t have to know 10 different policies for 10 different types of mortgages. But I soon found out that this demographic, I knew nothing about it. It woke me up about this demographic, and realizing that across Canada, there’s a problem, oh, 100%, and I’m more today, I like to educate on this demographic.

Challenges and Misconceptions of Reverse Mortgages

Clinton Wilkins
I think it’s the stereotype that we have that when you’re retired, you have money, or you shouldn’t have a mortgage.

Trevor Gordon
Exactly. And, the only people that I had to gauge were retirement owners’ parents, right? And, luckily, my father was a good saver and a good investor. And, my mom and dad are Snowbirds and bring my son down to Florida, it would be a great time. And I always just thought I had the opinion of, well, you’re retired, so doesn’t everybody Snowbird? I remember asking my dad one time, we were sitting on the balcony in the condo, and it was like: Dad, why doesn’t so and so come down? And he said, “I don’t know.” I now know why. He did say it’s financial. He did not have the right money to do it. And, if you asked me, okay, describe in one sentence, what does a reverse mortgage do? A reverse mortgage gives retirees the ability to age in place while increasing their cash flow, right? And that’s, again, there are other situations that we have, but that rems up what it is that we do and why it’s so important that this product is known no one of the best in the market, that there is an option. Because if we look at our average client, our average client is a 76-year-old, widowed female, okay, that’s the average. And you mentioned Clinton, the only source of income is OAS or CPP. So that client is making roughly $1,800 a month.

Clinton Wilkins
That’s wild. For me, I almost feel where CHIP is, and I’ll still refer to it as CHIP. I may not be using the right acronym, but I feel like where you are right now is where I was 20 years ago. When I started being a mortgage broker, people didn’t know what a mortgage broker was. I was doing a lot of education, like, why should someone deal with me? Like, that’s what I was fighting against, and it just wasn’t the education. Now, I think, by and large, obviously, a little bit with our show, we’ve educated a lot of consumers that they know that. An educated consumer, a consumer who’s looking for advice, who’s looking for different products, is coming to a mortgage broker who wants someone to hold their hand. But I feel like right now, reverse mortgages are in their infancy here in Canada, even though this has been around for 30 years, it’s just not widely known, like I see the commercials sometimes with Kurt Browning on the air. But consumers, by and large, don’t understand kind of the mechanics of it.

Trevor Gordon
Well, it’s by far the most, misunderstood product in the mortgage market today, that there are. There are so many false myths about what we do and how our reverse mortgage works. And, I have some very cute, amusing stories behind it, and recently, I was dealing with this gentleman. He was widowed. He was in his 80s, a very, very nice man, had a mortgage, had some credit card debt, and we were going to be able to take that pressure off of him. And, allow him to age in his home because he did not want to leave. But, a few days before it was funding, he had called me, and he said, “Trevor, I need to tell you that the furniture that I have is not worth much. It’s old and it’s not worth much.” And I said, okay, okay. Well, are you going to buy new furniture when these funds are for you, because you’ll have some money? He goes, “No, no, no, I’m happy with the furniture. But my son told me that when I pass, you guys come in and take everything.” So I wanted to let that my furniture there is not of much value.

Clinton Wilkins
And you laugh, and you’re like, that’s not the case.

Trevor Gordon
Number one, yeah, I can assure you, sir, we you are not in the used furniture business!

Mechanics and Benefits of Reverse Mortgages

Clinton Wilkins
And you’re also not in the house business like you want. You want someone else to deal with the house. You guys don’t want to get into that situation. Yeah. And then that’s the myth that we take all the equity, way, and that we take the property, any banking institution, when they have to take a property, there’s always a loss, and they do not want it. And we, I think, even for our show, I like, I talked about buying a foreclosure, nobody wants to get to that situation. Yes, and I think correct me if I’m wrong. But the way it works is the borrower can stay in the home for as long as they’re living, correct, or as long as they’re living and or as long as they’re in the house. So if they go to, like, unassisted living, then at that point they would have to sell the home.

Trevor Gordon
So, if we had a couple, husband and wife, and one of them was to go into a care facility, nothing changes. Okay? So there’s no requalification as long as one person’s still in the house.

Clinton Wilkins
And above ground!

Trevor Gordon
Yes, exactly. And it’s funny you mention above ground Clinton, because I have had clients say to me that I’m leaving this house in a coffin. And one lady in particular was in a wheelchair, living by herself. And the reverse mortgage was to pay for care to come in to, help her with food and cleaning up and her own, personal items, and, and even back then, I always wondered, and said to myself, like, why wouldn’t you just know it’s time for the care facility? Why not just sell the house? Yeah, and I thought that myself. But, and I have to tell you, it never really hit me until last year, my mom and dad, they’re in Parkland on Baker Drive. My mom’s been ill for many years with Parkinson’s disease dementia. And my sister and I were telling my father she needs to go into a care facility, because he was spending 100% of his time taking care of her. And she went into Oakwood, which is, which is a great place. But I find even when I go there to visit her weekly, or sometimes twice a week, it takes something out of me.

Todd Veinotte
Okay, Trevor, Gordon, Business Development Manager, Home Equity Bank, home of CHIP, Mortgage 101 we’ll be back.