Mortgages

Best Secured Credit Cards in Canada

June 8, 2022 by Ben 15 Comments

This page was last updated on October 12, 2022

Credit cards are useful in that they help build good credit, book hotel accommodation, rent cars, and purchase goods and services online. Interest rates have been low since the onset of the Covid-19 pandemic but some people with bad or tarnished credit may not qualify for regular cards. This is where secured cards come handy in allowing users to build good credit and shop in-store or buy products online.

Best Secured Credit Cards for Canadians

Major banks no longer offer secured credit cards which means that choices are more limited for Canadians. Still there are some good offers to look into if you have no or blemished credit like the cards that Home Trust and Refresh Financial feature.

Neo Secured Credit Card

The first secured credit card from Neo Financial is made for those who want low cost way to build their credit. Neo charges no monthly or annual fees and does not run credit checks. This means that anyone is eligible for this secured card. The only fee that comes with the card is the modest $50 security deposit. Approval is instant and guaranteed, just like the 1% cashback across all purchases. In addition to the 1% guaranteed, you can earn an average of 5% unlimited cashback at thousands of Neo partners. At participating partners, you can even earn 15% cashback on your first purchase. Neo’s secured credit card is a great option, whether you are looking to repair your credit or just starting out.

Interest rate: 19.99%-24.99%
Annual fee: $0
Cashback: 1% minimum, average 5% at partners

Refresh Secured Card

This card is no longer available. Check out their Credit Builder Loan. Refresh Financial offers a secured card that helps users to get a credit boost by making timely monthly payments. There is even a feature that allows you to get an idea how your repayment and spending patterns affect your credit rating. You can use their handy online calculator to check your utilization rate. For example, if the balance is $100 and the limit $600, then you have an optimal credit utilization rate (17 percent). There are other benefits for users, one being that payments are reported to both bureaus. Another is that the higher your credit score is, the lower your interest rate.

Interest rate: 17.99 percent
Maintenance fee: $3/month
Annual fee: $12.95
Credit limit: $200 – $10,000

Home Trust Secured No-Fee Visa

Also a good choice to fix your score fast, the Home Trust Secured No-Fee Visa has been voted 2020’s Best Credit Card for Rebuilding Credit. You will not only benefit from a zero annual fee but you only pay interest on your outstanding balance. The card allows you to make purchases and pay online up to your deposit limit. Home Trust also allows you to choose a deposit limit that works for you, and it can be as low as $500 and as high as $10,000.

Purchase interest rate: 19.99 percent
Annual fee: none

Home Trust Secured Visa

This is a low interest option to rebuild credit as long as you keep your account active and make timely payments. There are many benefits for holders such as the option to set your limit, set accounts online, pay utility bills, and make purchases online. The card also comes with purchase security coverage so that all eligible purchases are insured against damage or theft for 90 days. You can use the card to make payments in more than 200 territories and countries and with merchants that accept Visa cards.

Interest rate on purchases: 14.90 percent
Fee: $5 per month or $59 annual fee

What Is a Secured Credit Card?

Secured cards work much like standard ones in that they allow holders to build a positive credit history and make purchases, whether they buy groceries, book flights or cruises, or repay other outstanding balances. The most common varieties are American Express, MasterCard, and Visa. Whatever the brand of choice, users have to make a deposit which is used as a safeguard by the issuer as to cover any outstanding balances in case of missed or late payments.

Are Secured Credit Cards for You?

If you have bad credit and can’t qualify for a standard unsecured card, this is a good option to rebuild credit by making small purchases and paying the balance in full and on time. Using the card responsibly also means that you won’t incur interest payments. Interest rates are higher on average, and paying more than the minimum will save you a lot of money.

Benefits of Secured Credit Cards

The main benefit of secured cards is that they offer the chance to rebuild credit and apply for a wide variety of products with preferential terms and affordable rates. Your account history is forwarded to the major bureaus and goes toward your credit report. Not only this but you can use the card to shop online and make secure payments. Some issuers also offer added incentives such as upgrading and rewards points.

Security Deposit, Credit Limits, and Card Fees

When you get approved for a secured card, you will be asked to make a cash deposit which is equal or larger than your credit line. This means that credit limit is based on the deposit made. Some issuers offer the option to increase the credit line after a certain period provided that you use the card responsibly. Secured cards typically come with annual fees but there are some issuers that advertise zero fees.

Alternatives to Secured Credit Cards

If you can’t get a secured card, one option is to apply for a prepaid card that you can use to pay for services and goods. It is not linked to a credit, checking, or savings account and allows you to keep cash for later use. A major drawback is the fact that your payment history will not be reported to the credit bureaus. Still, they offer some benefits such as ease of use and safe and secure payments. Prepaid cards are easy to reload, and there are different ways to do this – in person, online, by direct deposit, or via bank account transfer.

Getting an unsecured card for bad credit is also an option, albeit the choice is more limited. Some issuers offer unsecured cards to Canadians with fair and good credit, regardless of their annual income. Added benefits for customers are low annual fees and interest rates, no fees for supplementary cardholders, and zero fraud liability.

A third option to look into is payday loans, and there are some benefits to consider such as fast and easy application, borrowed amount based on income level, and no credit check guaranteed approval. Still, getting a payday loan can be risky because of the very high interest rates and short terms that finance providers offer.

Other alternatives that financial institutions offer include guarantor and short-term loans, secured loans, overdrafts, and debit cards. The choice of product depends on your credit score, income, occupation, and financial circumstances.

In general, getting a secured card is a good choice for customers with little or no credit exposure, including young people and newcomers to Canada. It is also an option for borrowers with blemished credit who are refused a loan or credit card because they have past delinquencies, recent missed or late payments, or for any other reason. Borrowers with low or no income and high balances on cards and loans are also likely to get their application denied. A secured credit card is a good alternative for borrowers with a tarnished credit history who need a fresh start and a card to make daily purchases. We all know what having poor credit means – higher home and auto insurance premiums, difficulty securing a home lease, higher loan rates, and even strained personal relationships. A secured credit card offers users the chance to master good money management skills by borrowing responsibly.

Canadian Guide to Protecting Your Wealth from Inflation

October 19, 2021 by Ben 2 Comments

Inflation is on the rise in Canada and rose to 3.7 percent in July, 2021. This is the biggest jump since May, 2011 and is mainly due to more sectors of the economy reopening and consumers having where to spend their money. While pay rates are set to trail inflation, salary increase budgets are unlikely to catch up with inflationary pressures in 2021. Plus, it is not guaranteed that salaries will go up across all sectors of the economy. Inflation is robust but fortunately, there are ways to protect your wealth and fight the effects of inflation. From buying real estate and investing in stocks to alternative investments and portfolio diversification, there are time-tested strategies to protect your money.

1. Buying Real Estate

Investing in real estate may sound counterintuitive given that the average selling price is $688,000. Prices rose by 38 percent in 2020 alone. In most cases, Canadians looking to buy a home need to apply for a loan. As it turns out, however, the cost of borrowing decreases when wages increase and prices are on the rise. Average home prices are also rising faster than the consumer price index which makes investing in real estate a good hedge against inflation.

Additionally according to the Canadian Real Estate Association, home prices tend to be skewed by listings in expensive metropolitan markets such as Vancouver and Toronto. CREA tracks the house pricing index which gives a more accurate picture in terms of the types and number of properties sold.

2. Investing in Stocks and Bonds

There are investments that actually benefit from inflation, such being energy and retailers stocks. Energy companies profit when inflationary pressures are driven by oil price increases. Retailers also hike prices and considering the pandemic e-commerce boom, investing in e-commerce stocks can be a good idea.

Some equities both benefit and contribute to inflationary pressures, for example, metals, grain, lumber, and crude oil. It makes sense to buy shares in commodity companies either through mutual funds and exchange-traded funds or directly.

Investing in government bonds is yet another way to protect your money from inflation. What portion to dedicate to fixed income depends on how soon you will need cash and your risk tolerance. As a rule, government bonds offer income and security but the shorter the maturity, the lower the yield. That is because investors face less risk of interest rate increases. Bonds with longer maturity are more sensitive to interest rate fluctuations. The choice of shorter maturity depends on factors such as income requirements, nearing retirement, and the need to diversify investments.

3. Alternative Investments

The price of alternative investments such as silver, gold, and cryptocurrencies is also rising in the long run. As they are risky, dedicating a small portion to alternative investments only makes sense. At the same time, they are thought to not only retain their purchasing power but to outperform when inflationary pressures arise.

Also, there is a wide array of investment options to look into, besides bonds and stocks, each with its proposition, value, and risk factor. The range of solutions includes derivative contracts, commodities, antiques and art, managed futures, hedge funds, venture capital, and private equity.

The category of alternative assets is vast, indeed, but there are some factors to consider when building a portfolio. First, investors can choose to own assets such as farmland, commodities, precious metals, and real estate indirectly or directly. They can either buy physical assets or shares like, for example, invest in shares of gold or gold bars. The same is true for other assets such as real estate or farmland. When buying shares, the asset is tied to physical property, thus giving investors a choice between financial and physical assets.

Some alternative investments are classified as risky, such being the case with farmland. The value of farmland has steadily risen on an annual basis over the last three decades. There are no signs of slowing down in the short term, given the demand for commodities and agricultural products. In fact, farms will need to significantly increase production to meet growing demand as global population growth continues.

An alternative solution is to invest in inflation-linked bonds which are pegged to the consumer price index. In this case, the interest and principal rise and are adjusted for inflation. There are many benefits to investing in inflation-linked bonds such as less risk and volatility and higher returns compared to conventional bonds. A word of caution should be mentioned here, however. When deflation occurs, the bond principal will fall below par value, with interest due on the inflation-adjusted principal. Investors are likely to incur capital losses if deflationary pressures persist. The longer the maturity, the more vulnerable bonds become to interest rate fluctuations.

4. Portfolio Diversification

Building a diversified portfolio is an excellent hedge against inflation. The types of assets that can protect an investment portfolio against inflationary pressures include US stocks and REITs, treasuries, TIPS, commodities, emerging stocks, gold, European and Pacific stocks, and international REITs. Real estate investment trusts, for example, buy a diverse range of real estate that is rented out and produces solid returns. There is also an option to invest in international and US REITs and many have done so since the 2008 US market crush. The fact is that REITs invest in both commercial and residential real estate and are more diversified than conventional real estate portfolios. This means that they are more stable and less risky in case of rising inflation and economic shocks.

5. Consider a Fixed-Rate Mortgage Loan

There are currently variable-rate mortgages offered at about or even less than 1 percent. Getting a variable-rate mortgage sounds tempting as it looks like borrowing for nothing but it comes with a hitch. The fact is that a significant increase in mortgage rates could translate in hundreds and even thousands of dollars in interest over the loan term.

In comparison, five-year fixed-rate mortgages are currently available at about two percent. Regardless of inflationary pressures and rate fluctuations, borrowers pay two percent over the course of the mortgage. Locking in a variable-rate loan is a good idea when inflation is rising.

Investing in stocks, alternative assets, and real estate is worth considering given that high inflation could last for years. According to chief economist with Bank of Montreal Douglas Porter, inflation rates could remain at 3 – 5 percent for a year or even two. The outlook for the U.S. is similar, with prices and inflation rising until 2023. In fact, inflation south of the border is higher than in Canada, reaching 5.4 percent in June. Canada, however, is behind the U.S. on the path to economic recovery which is a red flag when it comes to recessionary pressures. Investing in physical and financial assets now can help mitigate the effect of expected rising inflation. With a variety of inflation-proof stocks such as energy and utilities and exchange traded funds, there are plenty of options to hedge against inflation.

Home Trust Credit Cards and Financial Solutions

September 2, 2021 by Ben 2 Comments

One of the largest trust companies in Canada, Home Trust features a selection of financial solutions, including credit cards, commercial and residential mortgages, and deposits. It is one of the few providers to offer secured cards to subprime borrowers who are looking to rebuild or improve their credit profile.

Company Overview

Established in 1987, Home Trust is a leading financial service provider with offices in Toronto, Winnipeg, Halifax, Montreal, Calgary, and Vancouver. It is a subsidiary of Home Capital Group, the largest provider of uninsured mortgages. Home Capital offers a wide choice of financial products, ranging from government-mortgage securities and TFSAs to investment certificates and short term deposits. Being a wholly owned subsidiary, Home Trust features a selection of guaranteed investment certificates tailored to the needs of commercial and individual customers. To clients who need to rebuild credit, Home Trust offers secured credit cards with cashback rewards, shopping security, and travel benefits.

Home Trust Credit Cards

Home Trust offers three types of credit cards, along with convenient online services to pay bills, access statements, and monitor spending behavior.

Home Trust Preferred Visa

Available nationwide except in Quebec, this card features a unique combination of benefits. It earns cash back on eligible purchases and charges no annual fees. The fact that this Visa card by Home Trust offers travel benefits such as guaranteed hotel reservations and no foreign transaction fees makes it a valuable asset for those who travel frequently, either for work or for leisure. While cash back is not offered on purchases in foreign currency, users earn 1 percent on all transactions at home in Canada. Money back is offered on daily purchases such as monthly bill payments, groceries, and gas. There is a convenient online calculator to check earnings based on approximate monthly spending. Added incentives for customers are emergency cash and card replacement, purchase security, and no cap on cashback earnings.

The Home Trust Preferred Visa is available to customers who are permanent residents of legal age and are not currently in bankruptcy. Only applicants with an annual income of $15,000 or higher quality for this card.

Annual fee: none
Interest Rate: 19.99 percent
Cash advances: 19.99 percent
Grace period: at least 21 days

Home Trust Equityline® Visa

For those who own their home, this is an option to tap into their home equity and access a secure line of credit. It can be used to pay for college, cover operating or start-up costs, finance home remodeling projects, or consolidate debt. Home Trust also offers an easy-to-use online calculator to calculate interest savings when consolidating debt. To determine their savings, users are asked to enter their current interest rate and balance. Consolidating $20,000 in debt with 22.99 percent interest, for example, saves $2,600 in annual interest payments.

With Home Trust’s Equityline® Visa, users benefit from a revolving line of credit that can be as high as $10,000. Added perks are low interest rates, no prepayment penalty, cash back on purchases, and no foreign exchange fees. Users get 1 percent back on qualifying purchases for no annual fee. This Equityline® Visa charges no foreign transaction fees, whether shopping online or using the card abroad.

Annual interest rate: 9.99 percent
Cash advance rate: 9.99 percent
Annual fee: none
Interest-free period: at least 21 days
Mortgage title fee: up to $781

Mortgage discharge fees vary by province as follows: Ontario – $295, the Maritime Provinces and Manitoba – $200, British Columbia – $75, and Alberta – $0.

To apply, customers are asked to provide employment and address information, along with details about their mortgage and property, including annual taxes, purchase price, and estimated home value. Additionally, applicants have to provide information about their liabilities and assets and the intended use of the funds, whether it is home improvement, debt consolidation, or anything else. Personal details to include in the application are number of dependents, marital status, and current residential address.

Home Trust Secured Visa

This card is a good choice for those who are looking to rebuild credit and for young people with limited or no credit exposure. It has been rated #1 secured card in 2021 by creditcardGenius and for a good reason. Users can choose from a no annual fee or low interest option and are free to set their own credit limit. The deposit amount can be as high as $10,000 and as low as $500. The best part is that almost everyone gets approved. The fact that monthly payments are reported to the major bureaus expedites credit improvement.

While customers with good or excellent scores could be better served by another card with travel or cashback benefits, Home Trust’s Secured Visa enables users to control their spending and works just like an unsecured credit card. Holders can use it to set up accounts, pay bills, and shop online.

Interest rate: 19.99 percent
Annual fee: none

Interest rate: 14.90
Annual fee: $59 percent

Interest-free period: at least 21 days
Foreign currency conversion: 2 percent

To apply, customers fill in an online application and provide details such as annual income, business phone number, employer name, occupation, and employment status. They are also asked to indicate a security deposit and confirm whether they are a close associate or family member of a head of international organization or a politically exposed domestic or foreign person. There is also an option to add an authorized user for a monthly fee of $2 or annual fee of $19.

Benefits for Users

Home Trust offers a number of benefits to card users, among which affordable interest rates, cash back, online account management, and access to home equity. All cards come with Visa purchase security by Alliance Company of Canada or Royal Sun.

Those who opt for the secured option can use it wherever VISA cards are accepted. Paying the balance on time allows users to build credit and apply for a range of financial products with lucrative rates and rewards. Secured cards are also a better alternative to prepaid cards which are not accepted by all retailers. Whether holders are up to date on their payments or not, prepaid cards have not effect on credit ratings.

Overall, Home Trust is a good financial services provider with a wide choice of product offerings. Perfect for basic banking and financing needs, Home Trust offers secured and unsecured VISA cards with no annual fee, hotel reservations, and other benefits. Online shoppers and travelers enjoy the double benefit of no foreign transaction fees and earning cash back on purchases. In addition to access to credit, customers are offered a range of business and residential mortgage products, including refinancing and renewals, together with high interest deposit solutions and guaranteed investment certificates. Additionally, Home Trust offers customers handy financial resources and information regarding home ownership, holiday spending on a tight budget, the impact of debt on credit rating, and plenty more.

Why Is the Real Estate Market in Ontario Cottage Country Booming?

July 19, 2021 by Ben Leave a Comment

When the pandemic started, real estate experts warned that home prices would decline due to recessionary pressures. Yet, after a brief downturn last spring, the market not only experienced a boom but this appears to be a lasting trend. The demand for cottage properties is growing for several reasons. One is that many Canadians are working remotely, and many information professionals choose to move to small towns and the countryside. Second is the fact that the border is closed except for essential travel. It is not clear when Canadians could board a plane, hence is the demand for cottage properties to have a vacation at home and within a commuting distance. Third is the fear of inflation and growing real estate prices as inflation has crept a little higher. But there is more driving prices up than remote working, closed borders, and inflationary fears.

Undersupply of Cottage Properties

There has been an undersupply of decent cottage properties in Ontario. The market imbalance is due to a combination of economic, demographic, and historical factors that created supply shortages even before the pandemic. Take Airbnb, for example. The concept behind it was to create a platform that is part of the sharing economy. Yet, the idea of renting out an extra room to make money on the side has proven attractive, and many choose to rent out, creating a shortage of properties for sale. The booming tech industry is also a contributing factor. The tech sector grew by over 50 percent by 2019, with more than 240,000 jobs in the GTA. Think of Shopify, Kik Messaging, Thelmic Labs, Google, Desire to Learn, Open Text, and many more to mention.

Labor shortages over the years resulted in construction delays. The reason for delays is not enough skilled labor. Additionally, the equipment required to build sewer systems and roads is expensive to maintain, run, and buy. Builders and local governments choose not to buy a lot of equipment because of the shortage of land to build on. There is also the demographic factor, with baby boomers moving to the countryside and not into condos in Toronto. Finally thanks to GO Transit’s commuter rail services, Toronto is now connected to the rest of the GTA. Many people choose to buy homes within a commuting distance to Toronto, thus contributing to an already existing housing shortage and growing demand.

Another reason for the shortage of supply is that cottage owners are less willing to sell compared to homeowners in Toronto. As Chestnut Park CEO Chris Kapches explains, the sale of cottages is typically discretionary “unlike sales in urban environments that are often driven by necessity”. The result is that cottage supply is further dwindling. Given the competitive market and low stock, real estate is now sold in about 23 days while in 2017 properties were sold in 132 days on average.

Because of the chronic undersupply of properties, the number of homebuyers looking to invest in cottage estate now exceeds the number of listings.

Pandemic-Driven Demand

Work from Home

The pandemic has proven information knowledge professionals that they can work from anywhere where they have a stable Internet connection. With travel restrictions and social distancing protocols still in place, cottage life has become more desirable, and survey results prove this trend. A survey published by CTV News show that 47 percent of young people aged 25 – 35 would choose country or small town living. Close to 2/3 of Canadians aged 25 – 40 also say that they prefer to work remotely if given the option. A 2021 survey by Remax also shows that 57 percent of Canadians in Atlantic Canada prefer country living. Overall, 47 percent of Canadians across all age groups would like to live in the countryside.

The pandemic has caused a mindset shift that is likely to stay. The blurring of recreational property and primary residence is at least in part resulting from the blurring of home and work from home. Even occupations with the highest level of proximity have seen and are likely to see further transformation after the pandemic subsides. This is the case with frontline workers who interact with customers in post offices, financial institutions, and retail stores. Work has partly migrated to digital transactions and e-commerce to curb the further spread of the virus. The computer-based office work sector is largely teleworking. It includes office settings in factories, IT companies, courts, hospitals, and financial institutions. This sector accounts for about 30 percent of employment in advanced economies such as Canada’s. Virtual meetings and remote work have become the norm in administrative settings, and this trend is likely to continue.

In fact, data by Statista shows that 24.2 percent of Canadians would like to work most hours from home and 14.7 percent prefer remote work altogether. Additionally, 40.8 percent say they would like to work half of the hours outside and half at home. Only 9 percent of Canadians prefer to work outside the home. As the pandemic has proven employers that remote work can be as productive as working from the office, this shift is likely to be permanent, with many choosing country living.

Low Interest Rates

The demand for rural properties has led to bidding wars that real estate agents have rarely witnessed. Cottage prices are forecasted to grow by 17 percent in 2021 due to the buying frenzy since the onset of the coronavirus pandemic. In addition to remote work, demand for recreational properties is driven by historic low interest rates. The pandemic and following containment measures imposed across Canada have plunged the economy into severe contraction, causing widespread unemployment. Recessionary pressures also caused interest rates to drop to near historic lows. In response to the pandemic, the Bank of Canada cut the key rate three times in March 2020 alone. Depending on the situation buyers are in, low interest rates on mortgage loans could mean significant savings. Additionally, some homebuyers saved money because they haven’t been able to travel overseas.

Demographic Profile of Buyers

People looking to buy a recreational property are quite diverse when it comes to demographics and age. Some of the homebuyers are families that send their children to summer camps. As sending kids to camps is not an option and might not be for some time, they want to buy a recreational property in a similar setting. Others usually travel abroad during the summer months and are starting to realize that vacationing abroad might not happen as much over the next couple of years. Still others want to invest in a rural property to keep their families safe. There is also a group of people that are interested in buying a property and change their lifestyle.

Is a Reverse Mortgage a Good Idea?

April 20, 2021 by Ben 1 Comment

A reverse mortgage is a type of a secured loan for which a guarantee is required, typically in the form of residential real estate. It is offered to senior borrowers aged 55 and older to allow them to receive cash income in exchange for their home equity. This option is only available to persons who have a considerable equity or own a residential property meaning that they paid off their mortgage in full. They are allowed to continue to live in their home and receive cash income based on the home equity conversion mortgage limit, their age, and current interest rates.

What Are the Pros of a Reverse Mortgage?

The main benefit for borrowers is the fact that they have regular income post-retirement. They also get non-taxable income and retain title to their property. As an added benefit, homeowners can choose from a variety of disbursement options, including as monthly payments, line of credit, specified amount, or in full. In general, this can be a good option for seniors who need extra income and have a more limited choice of borrowing options. Access to loan funding is an issue for retirees as they no longer receive salaried income. A reverse mortgage is also a good option for individuals who want to stay in their property post-retirement as it is close to their friends, family, or community members. The property may also be close to amenities, community centres, healthcare providers, convenience stores, and shopping malls.

What Are the Cons of a Reverse Mortgage?

A major downside is that borrowers are still responsible for paying homeowners’ association fees, maintenance, insurance, and property taxes. A related problem with reverse mortgages is that borrowers may have their property foreclosed if they are unable to pay homeowner’s insurance or property taxes. There are also fees and charges to consider, including appraisal fees, interest rates, and administrative and closing costs. The latter include home inspection costs, title insurance, and land transfer tax.

Another downside to consider is that interest rates tend to be higher compared to other loan options. The rate depends on provider and term, and similar to other loan products, the longer the term, the higher the interest rate. The administrative and closing costs are also a factor to consider as they can be around $2,000. When it comes to interest charges, they are higher than that of home equity lines of credit and standard mortgages but are lower than payday loans and cash advances, credit cards, private equity lending, personal loans, and unsecured lines of credit.

Finally, a third downside is that as interest charges accrue, home equity goes down which makes it more difficult to qualify for other loan options.

How Do You Qualify for a Reverse Mortgage?

To qualify, customers must have sufficient equity and prove that the home they live in is their primary residence. The amount that can be borrowed depends on factors such as interest rates, outstanding balances on existing mortgages, current property value, and age of the youngest owner. Financial institutions also look at things like type of property, condition, and the age of all persons who are registered on the title.

Should You Get a Reverse Mortgage?

A reverse mortgage can be a good solution if you need money to repay debts, cover healthcare expenses, pay regular bills like gas, electricity, and water, or home repairs or improvements. Another reason to borrow is to use the proceeds to buy a long-term care insurance policy. This is an option for seniors who are likely to end up in an assisted living facility for an extended period. At the same time, many seniors are currently choosing not to transition to a nursing home given the fact that over 80 percent of Covid-19 related deaths occurred in long-term care facilities. This has resulted in increased interest in reverse mortgages on the part of seniors looking to access funds and finance home improvements and renovations. A reverse mortgage helps borrowers to pay for at-home care. One problem is that while home prices have been relatively stable so far, significant price drops are to be expected due to the global pandemic and economic downturn. An extended period of stagnating prices may also have a negative impact on how much equity homeowners are left with. It is typically rising values that mitigate the effect of interest rates which is an unlikely scenario due to the coronavirus. For new borrowers, depressed home values mean that they will be offered less for what their property was worth. For example, for seniors who want to access 30 percent of their equity for a home worth $600,000, they will get $300,000. If the property lost 20 percent of its value, they will only be able to get $144,000.

Those who choose to apply will first have a phone meeting arranged to discuss different loan solutions that may work for their financial circumstances and situation. As a next step, appraisal will be scheduled to provide an estimate of the property’s fair market value. Appraisers are looking at details such as desirability, neighborhood, location, age, upgrades, maintenance, exterior and interior size, and condition. Once the appraisal has been completed, the bank confirms the amount of financing the borrower qualifies for. This is mainly based on factors such as condition, location, age, and whether the property is a freehold, condo, or townhouse. The next step is to decide on both interest rate options and amount to draw.

When looking into reverse mortgages, it also pays to shop around and consider other options such as moving into assisted living residence, buying a smaller apartment or home, or getting a credit card, line of credit or personal loan. Note that Canadians can borrow between 40 and 55 percent of their property’s value, depending on which provider they go for.