With a greater senior population, less savings, and lower investment returns, the demographics and growth opportunities keep improving for reverse mortgages.
“Our reverse mortgage offering is now widely recognized as a mainstream financial solution,” said Steven Ranson, President and CEO of HomEquity Bank.
That’s starting to show in its numbers.
HomEquity Bank’s 2010 performance was notable to say the least:
- 2010 Mortgage originations: $206 million
(Up 87% vs. 2009) - 2010 Mortgage portfolio: $1.0 billion
(Up 17% vs. 2009)
Also of note, broker originations doubled from 2009. Brokers now account to “well above a third of business generated with our partners,” says Arthur Krzycki, Director, Marketing & Public Relations.
HomEquity Bank remains the only national provider of reverse mortgages in Canada. With its distribution channels still evolving and seniors seeking more liquidity than ever, it seems like a given that it’ll post exceptional double-digit growth again in 2011.
Quick Stats:
- The average CHIP reverse mortgage is $110,000
- HomEquity Bank has 8,000 reverse mortgages in its portfolio.
- Analysts expect 33% earnings growth in 2011
- Analysts have a $7.81 average price target on the stock, which closed today at $6.79
Rob McLister, CMT
Last modified: December 24, 2021
There are much cheaper options than CHIP reverse mortgages. The CHIP variable mortgage rate of 4.75% or 5yr fixed of 5.99% is substantial in today’s environment. Plus there is approximately 2k in set up and admin fees, prepayment charges if terminated in first 3 years and often times an IRD penalty.
If a Senior think’s that they only have this option since they have limited income, they need to discuss their options with a trusted and knowledgeable advisor since many FI’S waive income verification for Seniors if they have significant assets like many do.
Those cheaper options aren’t without their own problems.
For one thing, most seniors who get reverse mortgages don’t have significant assets – besides their home. That’s why they get a reverse mortgage in the first place.
FIs may waive income verification but they never waive debt service ratios. On the other hand, reverse mortgages have almost no qualification criteria besides age and equity.
Banks don’t like people borrowing off their line of credit to pay their interest. Lenders review LOCs regularly and can raise your rate any time if they deem you a risk.
Worse yet, they can call in a credit line ANY TIME and that could spell disaster for a senior.
I don’t think 5.99% fixed is that bad given that a senior would pay 4% variable on a LOC. Prime can easily go up 2% in the next few years.
what is the effective interest rate on a reverse mortgage? the 5.99% fixed you are quoting, is the interest added to the balance and then compounded? if so, your effective rate would be much higher.
6.08%
http://www.calculatorsoup.com/calculators/financial/effective-interest-rate.php