The need for an improved cash flow in retirement is leading to record number of reverse mortgages in Canada, according to a HomEquity Bank study.

The report released by the only national provider of reverse mortgages in Canada notes its reverse mortgage originations were up 42% in the fourth quarter of 2011. On an annual basis, the company originated $239 million in reverse mortgages, a 16% year over year jump.

As at December 31, 2011, the bank’s portfolio of reverse mortgages of $1.2 billion was 17% higher than at the end of 2010.

“Since its inception 25 years ago, HOMEQ Corporation has analyzed the demographic wave of Canadian seniors and how our business can address these trends,” said Steven Ranson, president and CEO. 

“Now, the wave is here and we are meeting seniors’ needs for improved cash flow in retirement. This tremendous market demand is fuelling our strong growth in originations, while our disciplined approach to operating the business is resulting in healthy net income growth.”

  Read: Don’t rely on home equity in retirement

Reverse mortgages are offered to Canadian homeowners 55 and older and have no income, credit or health qualifications. Unlike traditional loans, borrowers don’t have to service the interest or repay the principal for as long as they own their home and are living in it.

Experts like Bryan Yu, economist, Central 1 Credit Union, are watching this trend closely. “It really speaks to the overall economic environment, but also over the longer term we’re looking at the demographic that are involved with reverse mortgages.”

Over the next 20 to 25 years, the Canadians population over 55 years will reach 10 million, Yu says, predicting that retirement tools such as reverse mortgage are going to get more popular.

“Instead of making a downward move [selling property] they might want to stay within the own home and [a reverse mortgage] provides them another tool that allows them to stay in place, but also obtain an income flow from that asset without selling it.”

That said, a reverse mortgage is not for everyone and financial advisors will need to educate their clients who take these out, he added.

“Changing demographics means changing financial services as well and [considering] that aspect, it’s more a question of education,” he says. “Reverse mortgages may not be for everybody, so retirees need to understand what type of products are available, but also what’s good for them in their situation. The role of an advisor in that scenario is looking at all the alternatives in terms of how [retirees] can finance their retirement.”

Originally published on Advisor.ca
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really Curt?? More like calling a spade a diamond. Huge fees?? CHIP charges no fees to set it up…appraisal and legal fees that’s it! Uncompetitive interest rate?? between 4.75%-5.95%…not sure how long you have been around but you should know what non competitive is! Are there better rates on regular mortgages? Of course, those are not regular mortgages. We get many calls for clients wanting to pay off the HELOC or regular mortgages because they don’t want the payment anymore and need better cash flow…I also get many inquiries that end up with a HELOC or regular mortgage. Blanket statements like you make are a tad ignorant to be honest…as a financial ADVISOR, you should educate yourself properly in order to advise better.

Wednesday, Jan 11, 2012 at 12:25 pm Reply


CHIP’s posted rates, and beside them my mortgage broker’s posted rates.
1 year 5.25% / 2.74%
3 years 5.65% / 2.89%
5 years 5.95% /3.19%
Appraisal Fee from $175 to $400 / $0

Wednesday, Jan 18, 2012 at 9:19 pm


Let’s call a spade a spade here – these are as bad a scam as the crap that took the global economy down in 2008 – fortunately, just not as big!. They scam seniors with huge fees, uncompetitive interest rates and total inflexibility. Instead of “looking at the demographic over the longer term” bankers should be taking this market away from the bandits. A HELOC or even a conventional re-mortgage will work much better for those seniors, and ensure that the bulk of the equity will benefit the client rather than the bank.

Monday, Jan 9, 2012 at 11:21 pm Reply