I received a call from a gentleman in the Shushwap last week.
He read my last column, which talked about how the mortgage changes are impacting both people who currently have a mortgage and people who are trying to buy a home.
He pointed out that I hadn’t covered how the mortgage changes of the last few years are affecting seniors.
For most Canadians, the message we heard growing up was work hard, pay off your mortgage, then you can retire and do all the things you’ve wanted to: travel, take up a new hobby, relax on the beach or the golf course.
Over the last few years I’ve seen a few heart-breaking situations. I’m not sure about the statistics, but it seems like the number of couples staying married (to their original partner) has dropped dramatically.
As a result, I’m seeing more seniors who are single and whose assets are relatively low due to splitting everything with an ex-partner.
The other situation I’m seeing is seniors who own their home free and clear but have minimal pension income to live on.
Prior to the last round of mortgage changes, we had access to several equity products through A lenders. For clients who had significant equity in their homes, some lenders would provide a mortgage up to 50 per cent (as an example) of the home’s value with more relaxed rules about income qualification.
The lenders that were previously offering these programs have pulled back and no longer offer them.
You might be thinking that someone who has paid off their home should have lots of money tucked away. Sometimes that’s the case, and sometimes it’s not.
For instance, I worked with a couple recently who did own their home free and clear. They had operated a small vehicle repair business their entire lives. They were old school and were less concerned about their bottom line and more concerned about helping people, including those who couldn’t afford to pay much.
Because they were self-employed their entire lives, they don’t have substantial pension income. What they do bring in covers basic living expenses but doesn’t leave much room for emergencies that come up, like replacing their furnace or vehicle.
Another retired client bought a condo when she and her husband went their separate ways in their late 60s. She has minimal CPP and OAS, but it covers her small mortgage payment, strata payment, and living expenses.
Her strata raised a special assessment to cover major repairs to the building. She had to come up with $25,000 or pay a monthly payment of $285.00.
I hunted high and low to find a suitable option for her, but under the new rules we could not get an approval anywhere to add the money to her mortgage. Refinancing her mortgage would have made a minimal difference to her monthly budget. Adding a new payment of $285 meant she had to find part time work to help make ends meet.
In her situation, selling her condo didn’t make any sense as she was still paying less than if she were renting a similar unit. She is caught between a rock and a hard place.
Another senior I worked with was left with significant debt when her husband passed away. It was a second marriage and the resulting court battle over her husband’s assets (he died without a will) almost bankrupted her.
In an ideal world, we all retire with significant cash flow and savings and our home free and clear.
Things don’t always go according to plan.
I have done more reverse mortgages for clients this year than I have in the last ten, which I believe is a direct result of the changes to mortgage legislation.
This new mortgage landscape has certainly changed my conversations when working with clients who are getting closer to retirement age.