Mortgage 101 – The Importance of Aging in Place

Todd Veinotte and Clinton Wilkins are joined by Trevor Gordon to discuss the importance of aging in place and the financial support parents provide to first-time homebuyers. They explore the CHIP: Reverse Mortgage and highlight its flexibility.

Todd Veinotte
Welcome back to Mortgage 101. Your guide to home ownership with Clinton Wilkins, our mortgage guru, me, Todd Veinotte and our guest, Trevor Gordon, Business Development Manager, Home Equity Bank, home of the CHIP: reverse mortgage. And Trevor, before the break, you were talking about your own experience. And I just wanted to give you a chance to finish that up, because I think it’s important.

Trevor Gordon
Thanks, Todd. So what I was saying, I finally appreciate that much more when a client says, I don’t want to leave the home, and I just want this money for care, right? And we do a lot of those across the country, because aging in place is so important, and that has such value, I think. And I think people, potentially, I don’t know if this is true or not, but they might live longer if they can be in their own home. Maybe there’s a lot of absolutely, and it’s all in our environment. It’s like, I know where everything is. I know where the store is, and I know who the neighbours are.

Todd Veinotte
Being able to pay for somebody to clear the driveway and mow the lawn, and take care of the garden that you love, is important.

Clinton Wilkins
Maybe even doing renovations of the home to stay in the home.

Todd Veinotte
Exactly. That’s right.

Trevor Gordon
I’m seeing more now of the children saying to their parents, Listen, Mom and Dad, I can’t continue to come to cut the grass. And, I’m thinking they’re getting a kid. They’re getting older. They’re getting older as well. So, this allows them to hire somebody to come in and do that work for them.

Parental Support in Housing Market

Clinton Wilkins
What I’m seeing a lot, Trevor, is that people want to get into the housing market, and parents and grandparents are helping first-time homebuyers get in. And a lot of these kids, and all you call them kids, but they’re adults. Need big, big gifts to be able to get into the housing market. Because of their income and the cost of housing, I’m seeing a lot of six-figure gifts. And I read something the other day, the average gift now, for a first-time home buyer to get into the housing market is something like $106,000.

Trevor Gordon
Yep. So it’s bank of mom and dad! And in the Toronto, Vancouver markets, it’s almost impossible for somebody to get in there 100,000.

Clinton Wilkins
Needs 500,000 or a million dollars.

Trevor Gordon
So, the Bank of Mom and Dad is a common use again, helping with down payments, and early inheritance. What I’ve seen a lot of here is mom and dad helping out through a separation or divorce, right? Never thought about that one, yeah. And I think, honestly, it’s almost like they’re getting their inheritance now versus later. And I think that’s more for the grandkids, that lets get them in the house. Nanny and Grandpa want to make sure the grandkids are just down the street, still, right? And they’re going to do what’s necessary to help in this situation.

Chip Reverse Mortgage Programs

Clinton Wilkins
They can’t swing at a big payment. I think that’s what’s so amazing about CHIP is that there are different methods. Like we talked a little bit on the break. The old school method was, you got a mortgage, you got the money, and then you didn’t make any payments, and that payment capitalizes, like the interest capitalizes every month. But you were telling us about the new school way, where, potentially, they still get a lump sum, depending on how much they can borrow, but they’re also getting a monthly payment. So tell us a little bit more about that.

Trevor Gordon
So, we have a few different programs. So, we could approve a client for up to, let’s just say, they’re approved for 200,000. Okay, well, they might, between their mortgage and the credit card debt, maybe they owe 130, so that’s 77 000 that comes to them in a few different ways. We can set it up where a monthly income stream comes into their bank account, or the money can sit there, so it’s almost like a pension, yes, very similar to a pension. Or the money can sit there like a line of credit or a HELOC, and they can access that in the future when they need it.

Clinton Wilkins
Okay, makes sense. I think that’s something that people don’t understand, and I think that has a lot of value. And, there are other ways that seniors can borrow from Trevor. I’m sure you see this like some seniors that come in to see us, have high net worth, have high income, and they just want a HELOC, cool, if you’re okay to pay the interest. There are other ways. Some want to get a mortgage. But what I think is interesting about this product is, it’s not as driven towards credit as I’ve seen some seniors be able to get approved for these types of products. And the credits are not that great, but it’s very driven by the equity.

Trevor Gordon
Yeah, absolutely. We are an equity lender. It’s Home Equity Bank, right in the name. We do not have a minimum credit score requirement. But, even saying that, our average credit score is probably about 75, 70, 60. The clients typically have stronger credit, but they have no cash flow. My eight years go from a need basis to a want. And I’m seeing a lot of deals now with the 70-something client that has a $200,000 mortgage. And, the mortgage broker is saying to this client, Listen, you are never going to pay this off in your lifetime. You’re 74 years old and you owe $200,000. Yes, why don’t you look at switching it to a product that works for you, like a reverse mortgage? And, I am seeing that way more now than I saw eight years ago. And it’s only going to become bigger and bigger, if we look at the people that are heading into retirement now, people that might be in their early 60s, they are not nearly ready. There are record amounts of consumer debt, and you talk about it every day. You talked about it earlier in this, Clinton. The people that are coming have a big mortgage, big credit card debt, and we’re able to consolidate that, pay it off, and keep them in the home.

Clinton Wilkins
So 55 is like the starting age, but basically, they almost need to have their home free and clear.

Trevor Gordon
Yeah, usually, at least in Atlantic, what we see is somebody has inherited that home, so maybe we have the 56-year-old daughter who was living in the home for the last five years, taking care of her mom, right? Because her mom hasn’t worked. Now, all of a sudden, Mom has passed away, and while she has this home, she has no income, she can’t pay the property taxes,

Clinton Wilkins
She can’t pay the heat, she can’t pay the insurance, because really, all she has is the home.

Trevor Gordon
So, we’re able to advance some funds to you to get them back on their feet. The intention is to go and find a job. But even Clinton, if you’ve got a 57-year-old that walked in your office today hasn’t worked in five years and is one month on the job, they’re probably not getting a mortgage.

Clinton Wilkins
They’re probably not. I’m a miracle worker, Trevor, but like, my powers are limited.

Logistics and Client Qualifications

Todd Veinotte
Okay, I want to ask you some more about the logistics of this thing. So if somebody has a worth house, say, assessed at $50,000, they have a $200,000 mortgage, they’re 60 years old, they just have 15 years left on their mortgage, or whatever.

Clinton Wilkins,
Is it a house?

Todd Veinotte
One borrower, say a couple. Okay, what can you do for that person? Tell us. Paint the picture. What can you do for that person?

Trevor Gordon
So we calculate what a person qualifies for based on three factors. Age is big. Age is number one. Okay, location is number two, okay, we’re going to lend more in Halifax than we would in a rural area, we do lend everywhere.

Clinton Wilkins
A lot of shout-outs to Ecum Secum, so if there are any of our listeners down there.

Trevor Gordon
And the third qualifier we do is, is just based on our own internal data. Okay, as I mentioned, we’re the algorithms or the actuaries, exactly, and that’s really what it comes down to.

Clinton Wilkins
Is it true that a couple normally lives longer than a single person? Or does a single person live longer than a couple, depending on the couple? Yeah, that’s true. Now we’re getting into some politics here. Maybe, I’m not sure.

Trevor Gordon
It’s funny, Clinton, we would give more money to a 75-year-old single male than a 75-year-old single female, because the single females will live longer.

Clinton Wilkins
The couple of males will live longer because they’re being taken care of.

Insurance and Risk Management

Trevor Gordon
Our average client is a widowed female, so we use those three aspects in determining alone to value. So, if that comes out that they qualify for $150,000 and they have a $250,000 mortgage, it doesn’t work. It doesn’t work, and they need to take the traditional route. Exactly, and that’s where Clinton would work with them in another way.

Todd Veinotte
All right, so if somebody had a $750,000 appraised house in Halifax, they had $200,000 on their mortgage. Is that a good client for you?

Trevor Gordon
So I would have to guess at the loan-to-value on that one, a couple that is 60 living in Halifax, maybe too young. Still, I think my guess would be we would probably do a high 20% loan-to-value. Yeah, so rounded up to 30.

Todd Veinotte
So, so is it safe to say that this is, this is a kind of insurance product? Is that a safe way to describe it? Because you’re talking risk here. I mean, it’s still a mortgage, right? But there are variables of risk. How long are people going to live in all that stuff?

Trevor Gordon
Yeah, we’re taking a risk that you, for example, let’s say it’s a 75-year-old?

Todd Veinotte
Conversely, some might die in two years. Not to be morbid, but that happened. These are the algorithms that.

Clinton Wilkins,
Anything could happen; we could die tomorrow. Who knows?

Todd Veinotte
Right? So it’s based, so it’s an insurance product based on actuarial numbers.

Trevor Gordon
And, one thing though, Clinton just mentioned, that 75-year-old, well, what if they live 30 years in the home? One of the myths about our product is that, oh, they die, and we go after the estate for any negative balance. We have a no-negative-equity guarantee. Okay, so that situation, Clinton, that you said they live for another 30 years. They owe us 800, and the house is now only worth 700. That 100,000, we do not go after the estate on that; that is in our contracts of a no-negative equity guarantee.

Clinton Wilkins
If somebody is ill with bad health and they move out of the house, you’re saying if they go into a home, then at that point they need to sell the house, or the estate needs to pay out the mortgage.

Trevor Gordon
They’re the only people. So if we did a deal with a husband and wife, and one of them was to go into a care facility, fine, or if one of them were to pass away. There are no changes. But Clinton, you would know in the bank world, if somebody has a HELOC and one of the persons passes away, shut it down. And, we have that guarantee that would never happen with one of our clients.

Todd Veinotte
All right. Hence, the younger you are, the more equity you need to make it correct.

Clinton Wilkins
The older you are, the more money you get. So when you think about things like being ageist, where you’re like, well, we’re not giving a mortgage to a 70-year-old, and a 30-year amortization CHIP is like, the older you are, the more you’re gonna get from us. We love. It’s the opposite.

Trevor Gordon
And you cap out. So that 55% max that we will go when you’re around 82.

Clinton Wilkins
Is the kind of thing you’re gonna get your maximum amount of equity out when you’re 82 exactly, and the minimum out when you’re 55.

Todd Veinotte
Trevor, there are a lot of layers to this, right? I think we just scratched the surface. It’s fairly complex, but I think people who are listening are enticed and get some of the benefits. So if they want to know more, you’re the person to reach out to. How do they get hold of you and get all these details?

Trevor Gordon
Well, number one, I would recommend they contact Clinton!

Clinton Wilkins
I think that’s big because we need to make sure this is going to make sense for people. But the nice thing is, Trevor’s educated and dealing with seniors, because that’s one thing I’m gonna say some of our listeners are children of potential borrowers that need the support. And I think that’s one of the biggest things. And we get a lot of referrals in from our clients, like my mom and dad need some support here.

Todd Veinotte
Okay, we’re at a time of the segment when everyone listens. Real treat having you in lots of great information. Trevor Gordon, Business Development Manager, Home Equity Bank, home of the CHIP reverse mortgage. We’ll be back.