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Thread: Writing a reverse mortage

  1. #21
    Senior Member sags's Avatar
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    Not sure where the $1500 a month comes from ... the OP is talking about loaning the home owner $150K at 1.5% ... that should work out to $2250 of interest *for the year*.
    Unless I am missing something, the home owner gets to use the OP's $150K where only about interest of about $187.50 to pay a month.


    You are missing the part where the loan converts to a mortgage upon receipt of government benefits of $1500 a month.

    Income of $1500 to provide for living and home ownership costs, plus an additional mortgage payment, would be difficult to maintain.

    Someone planted a tree a long time ago so I can sit in the shade.

  2. #22
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    Quote Originally Posted by carverman View Post
    This is one CHIP offering from HomEquity Bank, however, depending on appraisal and your age (especially at age 55),
    you may not get the 55% of the appraised value.




    Single lump-sum: 100% of funds the homeowner
    is approved for.
    • Initial lump-sum with Subsequent Advances:
    homeowner takes less than 100% of approved
    funds initially and sets aside the rest.
    • The minimum initial advance is $25,000.
    I never said they would get the 55% of appraised value though.And the OP stated the person is late 50's so they should definitely qualify.But I would never recommend a reverse mortgage unless it's a last resort and you won't need the home equity at a later point of life.You'll lose value fast in your house and the piper does have to get paid at some point.Nobody can predict future life and health needs either.If you can't afford a clear mortgage free house now do you really think you will on government benefits?

  3. #23
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    Quote Originally Posted by gardner View Post
    I am somewhat familiar with making a conventional mortgage loan. I'm curious if anyone knows about whether an individual can write a reverse mortgage to a non-related person, and what sorts of things happen.

    The homeowner is

    not quite old enough to collect OAP/GIS and CPP, but owns a home.
    not old enough to qualify for a conventional reverse mortage, and they're usurious crap anyway

    The idea would be to privately lend 50% of the home value now, basically write a private reverse mortgage, then once the income streams come online for the borrower, convert to a conventional mortgage and collect back as available. If I can afford to leave $150K tied up at an expected yield of 1.5% for 10-15 years, is this a feasible way of helping out a friend in need?
    Lots of debate here on reverse mortgages but let me give you a different angle.
    Not sure what exact help your friend needs but I'm assuming its for covering debts? If that is the case, why don't you straight up buy his house and have him pay you rent for as long as he lives there?? The funds from the sale would liberate your friend's debtload and hopefully leave him with sufficient funds to have substantial savings for future use. This does not tie up your personal finances and the rent would cover any incurred expenses. You can choose to get a mortgage for the purchase so no money would come out of your pocket. The day your friend moves on or you mutually agree that you no longer wish to hold the property, you can simply sell it.

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  5. #24
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    Quote Originally Posted by houska View Post
    ......

    You could of course also investigate purchasing part ownership of your friend's property for $150k now, which s/he repurchases back from you later. I expect this might have tax implications, since any gains on the property value would not be tax free to you since it is not eligible for the principal residence exemption. But it would be a way to help your friend as a real estate investor rather than as a lender (different risk-return profile). I'm assuming from your description of the situation that both of you are open to a range of solutions that i) do put your capital at some but bounded risk, and i) the terms are structured so as to keep you whole with a small (lower than market but positive) return on your capital.
    Actually, in this case, according to CRA the gain in value would be tax free.( as long as the OP was part owner only and the land amount was under the limit and it is not a rental and the friend continues to live in the property as prin res) This has been discussed before on this forum and links provided.

  6. #25
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    Quote Originally Posted by houska View Post
    You could of course also investigate purchasing part ownership of your friend's property for $150k now, which s/he repurchases back from you later.
    Yes, that has crossed my mind too. The amount of supplementary income required is not that great and a 150K or so principle yielding ~4% would not be substantially eaten away and might even make a bit. With pension benefits coming on stream I pictured probably 120-140K coming back and the remaining 20-50K being paid back at a very low rate -- maybe $500/month or something.

  7. #26
    Senior Member carverman's Avatar
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    Quote Originally Posted by yyz View Post
    I never said they would get the 55% of appraised value though.And the OP stated the person is late 50's so they should definitely qualify.But I would never recommend a reverse mortgage unless it's a last resort and you won't need the home equity at a later point of life.You'll lose value fast in your house and the piper does have to get paid at some point.

    Nobody can predict future life and health needs either.If you can't afford a clear mortgage free house now do you really think you will on government benefits?
    Well said. In my case at age 55, my health was still good, then I got lymphoma cancer and chemo.

    Beat the cancer, but the chemo ( and I suspect this, killed my immune system completely and when it came back a year later, my legs developed a weakness..auto immune disease.
    No treatment and no cure..I'm stuck with it in a wheelchair until it's time to go.

    Last winter I got a quick lesson on what it costs for assisted living if you are disabled locally here in Ottawa.
    $950 a week x 4 = $3400 a month. For that you barely get adequate care to use the toilet and the food they serve is cheap and greasy to reduce your lifespan even more.

    I inquired briefly a couple years ago about a RM with CHIP online. On my suggested value of $285k (tops)
    They suggested I could receive as much as $90K on my house ( I have no mortgage),
    and then with the extra deductions from that, (apprasal fee, mortgage registration etc etc, they take up to $2500 off, that but those fees are included in the $90k that they charge interest on at 5.33% per annum.

    I figured that if i had taken up on their offer, and stayed with assisted living in a private run seniors residence,
    I would be out of funds ( at $40, 800 per year) in 2 years!, then they would
    kick me out to go into a gov't run LTC (horrible!!) and then the CHIP loan would be due and payable.
    I would have to sell my house at that point and take a substantial financial hit.
    Not a good deal for the homeowner, but the ads are appealing.."wouldn't it be nice"..ya sure.

    it's a difficult decision to make...if I decided to go with CHIP, there would be no going back after, if I changed my mind.
    Better off just to sell outright when the time comes to move and continue living in your own house as long as it is possible with the help of a PSW.

    Last edited by carverman; 2017-01-10 at 12:44 PM.

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