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Financial Stress Index finds Canadians more worried about money than relationships, work, health

Financial Stress Index finds Canadians more worried about money than relationships, work, health

A recent survey by financial planning firm FP Canada has found that stress related to money outweighs worries around relationships, work and health for Canadians. That won’t come as a surprise to mortgage brokers, but the firm’s most recent Financial Stress Index contained a few surprising nuggets of information: Canadians are actually less worried about their finances than they were in 2018, and more than half of respondents in most areas of the country said their level of financial stress has not been impacted by COVID-19.

In 2020, 38 percent of the Canadians surveyed said money is their greatest source of stress, with 25 percent choosing health, 21 percent work and 16 percent relationships. Two years ago, 42 percent chose money, while 22 percent said personal health. The increase in Canadians saying health is a greater worry makes a fair bit of sense when the country is still dealing with its share of the COVID-19 pandemic. The fact that the widespread financial disruption experienced during the pandemic hasn’t caused financial worries to spike should be taken as a positive indicator.

When the findings are broken down by age, financial worries are greatest for the three youngest generations studied – millennials (44 percent), young Gen Xers (44 percent) and older Gen Xers (40 percent). Money was the main concern for only 37 percent of Canadians aged 55-64 and for 25 percent of those 65-plus.

The Index broke financial worries down into several categories and found that bills, debt, income stability and rent/mortgage payments were the biggest stressors for younger Canadians. Each category worried at least 36 percent of survey respondents, with bills (48 percent) taking top spot. For older Canadians, the greatest worry was saving enough for retirement.

A difference in earnings had little impact on individual levels of financial stress. An equal percentage of Canadians making $40,000 to $79,000 and those making over $80,000 – one-third – all chose money as their major stressor, although half of people making less than $40,000 rank money as their main source of anxiety.

The only region where more than 50 percent of Canadians felt their level of financial stress was impacted by COVID-19 was Alberta. In Quebec only 36 percent of respondents say the pandemic has increased their level of worry. Forty-seven percent of women said their level of stress has been affected by COVID-19, compared to 41 percent of men.

Impacts of financial stress
Half of the survey respondents said financial stress has impacted their lives in a negative way. Sixty percent of under-35s and 46 percent of those over 35 all reported experiencing either health issues (18 percent), relationship problems (15 percent), reduced productivity (14 percent) or family disputes (13 percent) related to financial stress. An additional 10 percent say they have experienced substance abuse or mental health issues.

FP Canada, in a not-so-subtle bit of self-promotion, compared the stress levels of Canadians who use financial planners to those who don’t. The company found that 53 percent of those working with a financial planner said financial stress does not impact their life. The data can be taken with a grain of salt, but if the numbers are accurate, enlisting the services of a financial planner may be a topic worth discussing the next time a client looks like he hasn’t slept or eaten in a week.

Monitoring a homeowner’s stress levels is something a broker must be willing to do. If clients seem to be teetering on the brink of collapse, encouraging them to find a healthy way to decompress can be an important first step toward improving their frame of mind.

“When people learn how to decompress in healthy ways and manage the difficult emotions that come with financial stress, they’re in a physiologically and psychologically calmer space to have better problem-solving abilities,” says clinical neuropsychologist Dr. Moira Somers. Once their emotions are brought under control, these individuals will then be in a position to tackle the issues at the root of their stress.

“People do best when they engage in a combination of the two strategies,” Somers says. “Focusing exclusively on either the problem itself or the settling of emotions can prevent people from making good decisions and then taking appropriate action.”

Source: MortgageBrokerNews.ca – by Clayton Jarvis 27 Jul 2020

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“We wanted to do the impossible—fit three families under one roof”: How one big brood is weathering the pandemic in their Markham home

Top from left to right: Pak Hung Ho, Roger How Cho Hee, and Christine How Cho Hee Bottom from left to right: Eric How Cho Hee, Charlotte How-Fang and Li Wen Fang

Before Covid-19, Eric How Cho Hee, an IT consultant, and Li Wen Fang, a social worker and psychotherapist, ambitiously decided to build a grand family home in Markham for themselves, their parents and an uncle. Their friends thought the well-meaning but wacky idea would never work. But as it happens, living in one giant 7,000-square-foot household bubble is smart when you need each other most.

Eric: In early 2017, my father was diagnosed with Alzheimer’s so I thought it would be best to move in with my parents. I owned the house where they lived in Markham, and we were going back-and-forth frequently to visit each other every week, anyway.

Li Wen: We wanted to do what seemed like the impossible: fit three families under one roof. My parents spend most of their time in Australia with my brother, but they would visit Canada occasionally for long periods before the pandemic, so we wanted to include space for them, too.

Li Wen’s home office is directly across from the front door

Eric: At the time, Li Wen and I lived in an 1,800-square-foot side-split nearby for six years. We liked the area, but the house was nowhere near big enough for our new needs. In September 2017, we sold the mortgage-free house my parents were living in for more than what we paid for and used the money to raze our place and build a new multi-generational home. We rented a house while our new one was being built. The 7,000 square-foot update by Solares Architecture would have enough room for us, our two year old, Charlotte, our four parents and Li Wen’s 70-year-old uncle, Pak Hung Ho.

Li Wen: My uncle Pak took care of me when I immigrated to Canada in 2001, and now that he’s getting older, I wanted to return the favour. My friends weren’t optimistic about the idea—most people choose to live apart from their extended family. But we ignored the naysayers and plunged right in.

The dining room, living room and kitchen were designed as one large space, so the family can hang out and enjoy meals together. The quirky fireplace is by Stûv
The double-height loft space is one half floor up from the main level. It’s also Charlotte’s preferred play area

Eric: When plans were submitted to the committee of adjustment to apply for variances, one neighbour speaking against our application suggested we needed such a big home to run an Airbnb business. Our architects decided to submit a finished plan and it was available for everyone to see.

Li Wen: Our trick to making it work was to ensure everyone has their own private space carved into the plan. We wanted each area to feel like its own cushy apartment—with a staircase and elevator connecting the halves. We asked for heated floors and shower benches for the older set. And a 17-foot-long pool and sauna in the basement.

Charlotte is a regular at the basement swim spa. She’s a natural at wading in the water

Eric: Li Wen, Charlotte and I moved in in October 2019 while other areas of the house were still being worked on. The rest of the household joined us in November, once the house was in a more finished state.

Li Wen: We hired Renee Godin of Interiors by Renee, who sourced all of the furniture and oversaw the decor, which was helpful in such a large, segmented home. She suggested adding colours and patterns because the house felt too white and sterile. But the bright orange Blue Star oven in the kitchen is Eric’s doing. He’s the cook in the family and he wanted something nice.

Uncle Pak is set up to host morning tea in his section of the home

Eric: My wife and I pay for all of the utilities, housekeeping and property taxes. Before the pandemic, my parents and Li Wen’s uncle would buy the additional items or other foods they needed. But we all share. We don’t divvy up the bills and we don’t charge them any rent. I go buy all groceries, and everyone takes turns cooking the various meals. I used to browse and see what’s on sale when I went to the store. Now it’s more focused. I grab and go. I’m out in less than an hour.

Li Wen: Uncle Pak’s area is dubbed “the tea room” because that’s where the family starts the day, with a tea ritual. My parents have an amazing wing on the other side of our bedroom; they are living in Australia now but that could change. Despite the endless space to wander, we mostly kick back together in the kitchen. A wall of large patio doors bring a lot of natural light into the kitchen, and they slide open easily for the seniors to access the patio and backyard. The 17,000-square-foot backyard has allowed the seniors to get fresh air in safe surroundings as the weather has gotten better.

A floor-to-ceiling window looks out at a portion of the expansive backyard
Patio doors slide open for easy access from the main level

Eric: The house isn’t complete yet. Since November 2019, we have slowly been adding finishing touches, like window coverings and missing cranks plus drywall touch ups. But we consider ourselves very lucky to be living in our new home. The combination of common space and private space has allowed us to weather the pandemic rather well. That’s not to say there is no tension, but that’s to be expected even during the best of times.

Li Wen and Eric’s master suite has a windsor bedframe and wallcovering, which gives it a woodsy cabin vibe
A view of Eric and Li Wen’s balcony from the backyard

Li Wen: One of my friends hasn’t seen her mom in two months because they didn’t allow visitors in her long-term care facility. I feel lucky everyone is together and safe at home. Eric and I are both working from here. My home office is directly across from the front door. It doesn’t have a separate entrance, and I haven’t seen patients here, but I do talk to them over video conference. Before the nice weather, in the early days of the lockdown, Charlotte would constantly knock on my home-office door during my calls with clients. That was tricky, but despite the disturbances, I’m happy to not have to commute to Scarborough every day like I used to.

Eric: I had negotiated working from home twice a week before the pandemic, so shifting my routine to full-time at home hasn’t changed too much professionally. Our built-in babysitter brigade takes turns watching Charlotte as she sprints around the backyard, where she collects branches and plays with her new mini-kitchen. She also has a small slide and a water and sand station.

Li Wen: Charlotte has become the main source of entertainment for all the adults. Before this, she was in daycare most days and we didn’t have that much time with her.

Charlotte’s bedroom has mini midcentury-modern furniture and a toddler-size trundle bed

Eric: The different areas of the house have helped us keep our daughter entertained, too. She uses the swim spa regularly. She has become pretty good and comfortable at wading in the water.

Li Wen: Eric has nurtured a love of baking, churning out four to five loaves a week. He makes farmer bread and baguettes. We used to buy bread from Longo’s, but nothing is fresher than this.Sign up for our newsletterFor the latest on Toronto during the reopening, subscribe to This CitySign me up!

Eric: Every two weeks, we also get a box of produce and meat delivered from a farm. Still, the seniors really miss going for dim sum each Sunday. And they have a touch of cabin fever, despite all the room to move about and the indoor pool.

Li Wen: To combat the boredom, my father-in-law, Roger, does weekly Zoom meetings with his geriatric day program. They exercise for 20 minutes and then talk about the news, but it’s hard because he can’t hear very well. Other seniors have attempted to boldly escape. One day, I found my mother-in-law, Christine, sneaking out. She said she was going for a walk, and that she wanted to start the car so the battery wouldn’t die. I think she might have been headed to one of her favourite spots: the supermarket. They are not as nervous as us—they’ve seen so much in their lives.

Source: Toronto Life – BY IRIS BENAROIA |

PHOTOGRAPHY BY RENEE GODIN |  JUNE 19, 2020

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Common myths and misconceptions about reverse mortgages

Common myths and misconceptions about reverse mortgages

Though reverse mortgages have been available in Canada for many years, they remain a commonly misunderstood product. A reverse mortgage is unlike most traditional mortgage products; it’s a long-term financing solution that gives borrowers over 55 years old access to a portion of the equity that already exists in their home and turns it into payment free, tax-free cash.

By 2024, it is expected that one in five Canadians will be aged 65 and older. Proceeds from a reverse mortgage can be used to free-up cash flow by paying-out existing debts, to help finance in-home care services, to purchase a second home, or to provide early inheritance. In addition, payments are completely optional, proceeds are tax free and the borrower will never owe more than the value of the home.

Since the introduction of their reverse mortgage business in 2018, Equitable Bank has been on a mission to help brokers understand the benefits of the product in order to better serve their clients, starting with building trust.

“Clients need not only to trust their broker, but also trust the lender who is providing their financing,” said Paul von Martels, vice president of prime and reverse mortgage lending at Equitable Bank. “We have a reputation for providing excellent service and continue to invest in those capabilities, so everyone involved, from borrowers to brokers, lawyers and appraisers, have the utmost confidence in the process.” 

To help broaden the understanding of a reverse mortgage, von Martels shared some common myths and explained why they just aren’t true.

The process of getting a reverse mortgage is difficult
Prospective reverse mortgage clients may have different expectations of how they want to work with their mortgage broker. There may be mobility issues or maybe they just feel more comfortable communicating in-person or over the phone rather than chatting through a video call. In some cases, borrowers may be acting through a power of attorney or a family member.

The process is very similar to a standard mortgage – borrower needs analysis, application submission, adjudication and finally fulfillment. What is unique is the need for independent legal advice (ILA) for both title holding and non-title holding spouses. This is an important borrower safeguard designed to ensure borrowers understand the obligations and details of the mortgage.

“We recognize the unique needs of the borrower and have designed processes to support. We are patient, flexible and allow clients and their brokers to move at the pace and manner that they feel most comfortable in. We can move fast too, closing these deals from start to finish in 1 week’s time. “

The bank will take my home
Equitable Bank registers a mortgage charge at 55% and provided the borrower continues to meet the ongoing mortgage obligations, he will never owe more than the fair market value of the home. This is commonly referred to as a no negative equity guarantee, meaning if the mortgage value ever exceeds the value of the property, Equitable Bank can only collect on fair market value, no more.

Reverse mortgages are considered a limited recourse loan which means lenders have recourse to the property only; equity shortfalls at the time of sale are not the client’s responsibility.

Reverse mortgages are a product of last resort      
More and more, this product is being used as a financial planning solution where borrowers are accessing home equity, at very competitive interest rates, to optimize investment portfolio strategies, participate in government tax programs, or add to their nest egg for next generation family members. Clients and brokers are also utilizing the various features of the product to lower the borrowing cost such as using Equitable Bank’s Lump Sum product or setting up scheduled advances.

The narrative of reverse mortgages is changing, and people are taking notice. The product is improved, the rates lower, and more than ever, it serves a critical financial planning need – aging in place.

Borrowers are locked in for life with a reverse mortgage
A borrower should never feel trapped or tied into a product. That said, its important for borrowers to understand the prepayment options.  Reverse mortgages are a longer-term product and might not be the best option for clients who want to pay-out in a few years.

Equitable Bank understands that its reverse mortgage clients need flexibility in this regard and have made significant enhancements to the prepayment charges and allowances offered.

“One example is if a borrower is moving into a long-term care facility, 50% of the charge is waived, likewise if the last surviving borrower passes, its entirely waived” said Joe Flor, director of national sales at Equitable Bank. “In general, Equitable Bank’s prepayment features allow clients to repay sizable amounts of interest and principal without incurring any charges. It’s the flexibility people need and expect.”

Rates are too high
For those less familiar with reverse mortgages, there’s a belief that rates are sky-high and more like private lending rates, closer to 10% for example. This certainly isn’t the case.

“Our fixed rates range from 3.84% to 4.84%. Much lower than people think,” said von Martels. “One-time setup fees, appraisals and legal support range between $2,500 to $4,000. Accrued interest compounds, but for borrowers with other sources of cash flow, there are options to minimize the interest cost with partial or full monthly interest repayment.”

On the other end of credit-pricing spectrum, reverse mortgages are commonly compared to HELOCs.  Unfortunately for those without a HELOC already in-place, the income qualification standards can be quite difficult to meet on a retirement income and they don’t offer many of the favourable borrower safeguards that reverse mortgages do.

At the end of the day, von Martels says it’s about building trust and knowledge with industry partners. Equitable Bank is long established, managing more than $30 billion in assets.

“We have a reputation as being a disciplined lender with a strong commitment to its mortgage broker partners. Our reverse mortgage business is no different.  We’re in this for the long term and will continue learning and improving. That’s our commitment to our broker partners.”

Source: Mortgage Broker News – by Kasi Johnston 01 Jun 2020

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Trapped: Helping separated clients manage unwanted cohabitation during COVID-19

Trapped: Helping separated clients manage unwanted cohabitation during COVID-19

There’s a certain level of connectedness that comes from dealing closely with clients’ finances, their families and their dreams for the future. Because of the proximity to a client’s life and everything that makes it unique and worth securing, it’s only natural for brokers to concern themselves with more than just the bottom line.

When COVID-19 came barrelling toward Canada in March and strict social distancing and stay-at-home orders were put in place, one of the many unforeseen disruptions involved couples in the midst of divorces or separations being forced to shelter in place together.

“Pre-COVID-19, couples that were at crossroads in their relationships, someone would just pick up and go. They could easily find accommodations,” says Nathalie Boutet of Boutet Family Law and Mediation in Toronto. “Right now, with COVID-19, it’s very difficult for people to move out quickly. They don’t know where to go, they don’t know what’s available and you can’t see suites in person.”

The inability to separate has put many couples into complex, sometimes violent situations. In those involving domestic abuse, many victims simply have nowhere else to go. Government shelters are full and most short-term solutions, like Airbnb’s, have been taken off the market.

“People are nervous, and they’re accessing mediation services to try and sort out rules and regulations around their current properties,” Boutet says.

For owners bent on selling, one of the ongoing problems is access to a comprehensive appraisal, which is critical in ensuring the separated parties receive a fair share of the proceeds. Realtors can still access data on comparable properties to determine a home’s value, but few would trust the comps established over the last four weeks. Certified home evaluators can provide a more thorough look at a property’s structure – if they can get inside.

Faced with the prospect of selling into an unpredictable market, the advice most mortgage professionals would give would be “Don’t sell!” But Boutet says there may be more at stake than achieving an above-asking sale price.

“It’s really important to figure out what’s going on in the house. Is there a lot of pressure? Is someone really, really unhappy and you can see it?” she says. “If there are children and it’s really, really tense, there should be ways to put the house up for sale.”

That might involve moving more quickly than most mortgage brokers and real estate agents would prefer. Boutet suggests patch-ups over renovations and says sellers could potentially reach out to staging companies for advice rather than waiting for an in-home consultation that can’t legally occur.

Selling rather than waiting out the pandemic may also help alleviate some of the stress involved with selling a home, which will be particularly high in separated households also reeling from COVID-19 layoffs.

“It’s not just a commercial issue right now,” Boutet says. “It’s also an emotional issue, and an energy issue.”

Mortgage brokers don’t have a legal obligation to step in and try to improve a client’s domestic situation, but Boutet urges them to be observant and sensitive and be willing to refer clients to services they may be in need of, whether it’s moderate mediation or full-on therapy.

“Mortgage people are people persons. They have instincts and they’re super good at picking things up,” she says. “Don’t hesitate to refer out to professionals because there are a lot of services that are running efficiently, even under COVID-19.

 

Source: Mortgage Broker News – by Clayton Jarvis 08 May 2020

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Why Black Homeowners in Brooklyn Are Being Victimized by Fraud

Broadies Byas was deceived into signing away the deed to her townhouse in Bedford Stuyvesant, Brooklyn, after she fell behind on her mortgage payments, federal prosecutors said.

 

 

Broadies Byas’s home is a hidden gem. From the outside, it looks unassuming, if somewhat neglected.

But past the porch of the Victorian townhouse a rich interior reveals itself: tall ceilings, a mahogany staircase, stained glass doors and picture frames virtually untouched since the home was built in 1856.

The house, in the Bedford-Stuyvesant neighborhood in Brooklyn, has an even more remarkable story — Ms. Byas’s father, a teacher who was born into a family of former slaves in South Carolina, bought it in 1957 for $7,500.

But now the house is going through a tumultuous chapter. Ms. Byas, 54, is working to reclaim it after she was duped into signing away her property deed, according to federal prosecutors. Though the house is worth about $1.2 million, she gave it up, unwittingly, for a mere $120,000.

“I pride myself as a true New Yorker — angry, skeptical, not trusting,” Ms. Byas said. “But I felt like the stupidest person on the planet.”

A booming real estate market in Brooklyn is fueling a crime that law enforcement authorities say has taken hold in largely African-American neighborhoods that are being gentrified — deed theft, which involves deceiving or sometimes coercing a homeowner into signing forms that transfer ownership of a property.

In many cases, a homeowner is made to believe the documents involve some type of financial assistance, but in fact turn out to be the property deed.

Bedford-Stuyvesant and Crown Heights, both known for their collection of largely intact townhouses that cost a fraction of what similar homes sell for in Manhattan, have become hotbeds for deed theft, according to law enforcement authorities. Homeowners in Prospect Heights, Brownsville and East New York have also been targeted.

Real Estate Shell Companies Scheme to Defraud Owners Out of Their Homes

Of the nearly 3,000 deed fraud complaints recorded by the city since 2014, 1,350 — about 45 percent — have come from Brooklyn, according to data compiled by the city’s Department of Finance. (The borough accounts for roughly 30 percent of the city’s housing units.)

The authorities believe the problem may be more widespread since homeowners may not realize right away that they have been victimized.

“It’s just a drop in the bucket,” Eric Gonzalez, the Brooklyn district attorney, said at a recent town hall meeting in Bedford-Stuyvesant. “It’s really hot in the real estate market in Brooklyn. People want to steal our homes.”

In Ms. Byas’s case, which led to the arrest of a man and his son, the aim was to flip her home and try to resell it to buyers who have been flocking to central Brooklyn seeking more affordable homes in lower-income neighborhoods.

ImageHomeowners in largely African-American neighborhoods, like Bedford-Stuyvesant in Brooklyn, have become targets of deed theft.  
Credit…Elias Williams for The New York Times

Those orchestrating the schemes often hide behind limited liability companies and shell companies, making it difficult for homeowners to determine if they are being swindled and by whom.

“By the time a homeowner realizes what has happened, the home may have already been sold or mortgaged multiple times,” said Christie Peale, executive director of the Center for N.Y.C. Neighborhoods, a nonprofit organization that helps homeowners.

Even though rising property values in neighborhoods like Bedford-Stuyvesant have provided homeowners with more equity, many remain cash poor.

As they grow older or lose a spouse, their homes can accumulate liens stemming from unpaid property taxes or water and sewage charges, making them vulnerable to fraudsters who often search public records to identify homeowners under financial stress.

“Deed theft has become a common tool of career criminals and unscrupulous real estate developers to illegally obtain real estate, most often with the goal of selling it at a huge profit in high-demand housing markets,” Letitia James, the state attorney general, said in an email.

Dairus Griffiths, 65, has been mired in a five-year legal battle to recoup his home in Bedford-Stuyvesant after he was ensnared in a scheme and ended up giving up the house, which was worth $1.3 million, for $630,000.

Mr. Griffiths was facing foreclosure after a tenant stopped paying rent, causing him to fall behind on his mortgage payments.

Not long after foreclosure proceedings began, a man named Eli Mashieh approached Mr. Griffiths claiming to run August West Development, a real estate firm in Queens, according to Theresa Trzaskoma, Mr. Griffiths’s lawyer.

He told Mr. Griffiths that he was going to lose his house and offered him a cash advance, Ms. Trzaskoma said. Feeling pressured and fearful that he would soon be evicted, Mr. Griffiths signed a document selling his home for $630,000, believing it was a preliminary sales agreement that he would have the chance to reconsider.

After talking to his daughter, Mr. Griffiths did try to cancel the sale, but when he called Mr. Mashieh he refused, saying it was a done deal. Mr. Mashieh obtained a default judgment and the sale eventually went through.

Image

A brownstone building under renovation in Bedford-Stuyvesant. 
Credit…Elias Williams for The New York Times

But Daniel Richland, a lawyer for Mr. Mashieh, disputed Mr. Griffiths’s claims and said a court had effectively ruled that the sale was legitimate.

Some homeowners may not even know that their deeds have been stolen, the authorities say. Documents proving the sale of a property are recorded by the city registrar’s office, but not necessarily checked to ensure that they are legitimate. Owners might continue paying the mortgage for a property they no longer own.

“It is, in fact, easier to steal ownership of a home than actually burglarizing it,” said Travis Hill, who oversees real estate fraud for the state attorney general’s office.

Recovering a home whose deed has been illegally transferred can be difficult unless there is clear proof of wrongdoing, like a forged signature. In one case, the authorities arrested a man accused of committing fraud because the signature on a deed came from someone who had been dead for years.

It is also challenging to determine whether the person had entered a bad, but not necessarily fraudulent, financial deal. “It’s often a very hard line to straddle,” said Noelle Eberts, a lawyer at the New York Legal Assistance Group who represents Ms. Byas.

In Ms. Byas’s case, two men, Herzel Meiri, 64, and his son, Amir, set up a limited liability company called Launch Development.

The two men instructed employees to search online for financially distressed properties in Brooklyn, Queens and the Bronx, according an indictment filed by federal prosecutors in Manhattan. Ms. Byas was among 60 homeowners the two men, along with five other accomplices, were accused of swindling.

The men described themselves as foreclosure specialists who helped property owners with loan modifications or promised that they would be able to transfer their properties to trusted relatives to avoid losing their homes.

Homeowners were encouraged to sign documents that were later used as proof they had agreed to sell their homes to Launch Development, prosecutors said.

The company also deceived banks into approving the sale of homes by providing falsified documents, including paperwork edited or completed after homeowners had signed them.

“Launch Development resold many of the homes, which were purchased at fraudulently deflated prices, for an enormous profit,” the indictment read.

The Meiris pleaded guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 30 years in prison. Herzel Meiri was sentenced to 10 years’ imprisonment in August 2018, and Amir Meiri to five years’ imprisonment in November 2018.

Ms. Byas’s ordeal began in 2008, after she learned she had multiple sclerosis and could no longer work. By 2014, she owed about $69,000 in unpaid mortgage payments and other bills and was facing foreclosure.

She believed a second mortgage would prevent her from losing her home.

One day, a young man rang her doorbell claiming he worked for Homeowners Assistance Services of New York, an organization specializing in foreclosures that turned out to be linked to Launch Development.

He was polite, had a cherubic face and was someone Ms. Byas said she would feel comfortable inviting to a cookout. “When you’re in a panic, you think, ‘I can’t believe my luck,’” she said.

After several visits from the man, Ms. Byas was taken by a private car service to Launch Development’s offices in Queens, where she described being, at various turns, cajoled or pressed into signing reams of documents. Instead of a loan agreement, she had signed a deed document, giving away the title to her home.

In total, the company schemed to buy her home for $120,000, about 10 percent of the property’s value. She was able to show that she had been swindled because the check came from Launch Development, which had been on the radar of law enforcement authorities.

Still, five years later, the title to her property is in the hands of the government and she is waiting to hear when she will get it back.

“We were living the American dream,” Ms. Byas said. “This is a house that your ancestors worked for. They came from nothing.”

Real Estate Shell Companies Scheme to Defraud Owners Out of Their Homes

7-Year Fight to Reclaim a House Stolen in the Wave of a Pen

Think You Own Your House? Check the Deed

Source: The New York Times – By Oct. 21, 2019
Kimiko de Freytas-Tamura was previously based in London, where she covered an eclectic beat ranging from politics to social issues spanning Europe, the Middle East and Africa. Born and raised in Paris, she speaks Japanese, French, Spanish and Portuguese. @kimidefreytas  Facebook
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Don’t-pay-til-you-die reverse mortgages are booming in Canada as seniors binge on debt

Don’t-pay-til-you-die reverse mortgages are booming in Canada as seniors binge on debt

Already carrying debt, many seniors can’t downsize because they can’t afford high rents, so turn to reverse mortgages for a new source of income

If you’re 55 or older, you can borrow as much as 55 per cent of the value of your home. Principal and compound interest don’t have to be paid back until you sell the home or die.Getty Images/iStockphoto

Reverse mortgages are surging in Canada as more older people join the country’s debt bandwagon.

If you’re 55 or older, you can borrow as much as 55 per cent of the value of your home. Principal and compound interest don’t have to be paid back until you sell the home or die. To keep the loan in good standing, homeowners only need to pay property tax and insurance, and maintain the home in good repair.

“We’ve only been in this market for 18 months, but applications are jumping,” and have tripled over the past year, Andrew Moor, chief executive officer at Equitable Group Inc., said in an interview. The company, which operates Equitable Bank, sees the reverse mortgage sector expanding by about 25 per cent a year. “Canadians are getting older and there is an opportunity there.”

Outstanding balances on reverse mortgages have more than doubled in less than four years to $3.12 billion (US$2.37 billion), excluding foreign currency amounts, according to June data from the country’s banking regulator. Although they represent less than one percentage point of the $1.2 trillion of residential mortgages issued by chartered banks, they’re growing at a much faster pace. Reverse mortgages rose 22 per cent in June from the same month a year earlier, versus 4.8 per cent for the total market.

The fact that these niche products are growing so quickly offers a glimpse into how some seniors are becoming part of Canada’s new debt reality. After a decades-long housing boom, the nation has the highest household debt load in the Group of Seven, one reason Bank of Canada Governor Stephen Poloz may be reluctant to join the global monetary-policy easing trend.

More seniors are entering retirement with debt and the cost of rent has shot up in many cities, making downsizing difficult amid hot real estate markets. Reverse mortgages offer a new source of income.

Canada’s big five banks have so far shied away from the product. Only two lenders offer them in Canada. HomeEquity Bank, whose reverse mortgage has been on the market for 30 years, dominates the space with $3.11 billion on its books. Equitable Bank, a relatively new player, has $10.1 million. Shares in parent Equitable Group have surged 75 per cent to a record this year.

Critics say reverse mortgages are a high-cost solution that should only be used as a last resort.

“When they think of their cash flow, they’re not going to get kicked out of their house, but in reality, it really has the ability to erode the asset of the borrower,” Shawn Stillman, a broker at Mortgage Outlet, said by phone from Toronto.

HIGHER RATES

Interest rates are typically much higher than those for conventional mortgages. For example, HomeEquity Bank and Equitable Bank charge 5.74 per cent for a five-year fixed mortgage. Conventional five-year fixed mortgages are currently being offered online for as low as 2.4 per cent.

Atul Chandra, chief financial officer at HomeEquity Bank, said the higher rates are justified because the lender doesn’t receive any payments over the course of the loan.

“Our time horizon for getting the cash is much longer, and generally the longer you wait for your cash to come back to you, the more you need to charge,” Chandra said in a telephone interview.

MOST DELINQUENT

Executives at HomeEquity Bank and Equitable say they are focusing on educating people about reverse mortgages to avoid mistakes that were made in the U.S. during the housing crisis — including aggressive sales tactics.

While delinquency rates on regular mortgages are still low for seniors, they were the highest among all age groups in the first quarter, at 0.36 per cent, according to data from the federal housing agency. The 65-plus demographic took over as the most delinquent group at the end of 2015. For non-mortgage debt, delinquency rates in the 65-plus category have seen the biggest increases over the past several quarters, Equifax data show.

Reverse mortgages aren’t included in typical delinquency rate measures — borrowers can’t be late on payments because there are no payments — but they can be in default if they fail to pay taxes or insurance, or let the home fall into disrepair. However default rates for reverse mortgages have remained stable, even with the strong growth in volumes, said HomeEquity’s Chandra.

According to a scenario provided by HomeEquity Bank, a borrower who took out a reverse mortgage of $150,000 at an interest rate of 5.74 per cent would owe $199,058 five years later. A home worth $750,000 when the reverse mortgage was taken out would be worth $869,456 five years later, assuming 3 per cent annual home price appreciation, meaning total equity would have grown by about $70,000.

Source: Financial Post – Bloomberg News 

Chris Fournier and Paula Sambo 

September 16, 2019

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How reverse mortgages staged a comeback

Professor Chris Mayer has a lesson for ­homeowners: Reverse mortgages, which let older Americans tap their home equity without selling or moving, aren’t as risky as some say. In an online video, he brushes aside “common misconceptions,” including fears about losing your home.

Mayer, a real estate professor at Columbia Business School, isn’t an impartial observer. He’s chief executive officer of a company that sells reverse mortgages. He’s trying to rehabilitate one of the U.S.’s most-­reviled financial products—part of a broader push that relies in part on academics with interests in the mortgage industry.

The host of Mayer’s talk was the American College of Financial Services, a school that trains financial planners and insurance agents. Until recently, it had a task force funded by reverse mortgage companies, which each contribute $40,000 a year. They include Mayer’s firm, Longbridge Financial, and Quicken Loans’ One Reverse Mortgage.

To show the need for reverse mortgages, industry websites cite a Boston College retirement research center run by Alicia Munnell, a professor and former assistant secretary of the Treasury Department in the Clinton administration. She once invested $150,000 in Mayer’s company, though she’s since sold her stake.

The six-year-old task force cites key successes. Mainstream publications have run articles quoting positive research on the loans, and financial planners are growing more comfortable recommending them. The Financial Industry Regulatory Authority, the securities industry’s self-regulatory agency, in 2014 withdrew its warning that reverse mortgages should generally be used as “a last resort.”

Mayer and Munnell said they’ve fully disclosed, in research, appearances, and interviews, their financial interest in the lender. Columbia and Boston College both said they approved the arrangements.

The professors and industry officials say these government-backed mortgages deserve a second look, partly because of a series of federal reforms in recent years designed to protect taxpayers and consumers.

“We are looking to help people responsibly incorporate home equity in their retirement planning,” Mayer said of Longbridge.

Reverse mortgages let homeowners draw down their equity in monthly installments, lines of credit or lump sums. The balance grows over time and comes due on the borrower’s death, at which point their heirs may pay off the loan when they sell the house. Borrowers must keep paying taxes, insurance, maintenance and utilities—and could face foreclosure if they don’t.

While even critics say the mortgages can make sense for some customers, they say the loans are still too expensive and can tempt seniors to spend their home equity early, before they might need it for health expenses.

Fees on a $100,000 loan, based on a $200,000 home, can total $10,000. Because the fees are typically wrapped into the mortgage, they compound at interest rates that can rise over time. Homeowners who need cash could be better off selling and moving to less expensive quarters.

“The profits are significant, the oversight is minimal, and greed could work to the disadvantage of seniors who should be protected by government programs and not targeted as prey,” said Dave Stevens, CEO of the Mortgage Bankers Association until last year and a commissioner for the Federal Housing Administration in the Obama administration.

Academics represent a new face for an industry that’s long relied on aging celebrity pitchmen. The late Fred Thompson, a U.S. senator and Law & Order actor, represented American Advisors Group, the industry’s biggest player. These days, the same company leans on actor Tom Selleck.

“Just like you, I thought reverse mortgages had to have some catch,” Selleck says in an online video. “Then I did some homework and found out it’s not any of that. It’s not another way for a bank to get your house.”

Michael Douglas, in his Golden Globe-winning performance on the Netflix series The Kominsky Method, satirizes such pitches. His financially desperate character, an acting teacher, quits filming a reverse mortgage commercial because he can’t stomach the script.

In 2016 administrative proceedings, the U.S. Consumer Financial Protection Bureau accused American Advisors, as well as two other companies, of running deceptive ads. Without admitting or denying the allegations, American Advisors agreed to add more caveats to its advertising and pay a $400,000 fine.

Company spokesman Ryan Whittington said the company has since made “significant investments” in compliance. Reverse mortgages are “highly regulated, viable financial tools,” and all customers must undergo third-party counseling before buying one, he said.

The FHA has backed more than 1 million such reverse mortgages. Homeowners pay into an insurance fund an upfront fee equal to 2 percent of a home’s value, as well as an additional half a percentage point every year.

After the last housing crash, taxpayers had to make up a $1.7 billion shortfall because of reverse mortgage losses. Over the past five years, the government has been tightening rules, such as requiring homeowners to show they can afford tax and insurance payments.

In response to public concerns, Shelley Giordino, then an executive at reverse mortgage company Security 1 Lending, co-founded the Funding Longevity Task Force in 2012. It later became affiliated with the Bryn Mawr, Pennsylvania-based American College of Financial Services.

Giordino, who now works for Mutual of Omaha’s reverse mortgage division, described her role as “head cheerleader” for positive reverse mortgages research. Gregg Smith, CEO of One Reverse Mortgage, said the group is promoting “true academic research,” including work by professors with no industry ties.

In January, the American College cut its ties with the task force because the school, as a nonprofit institution, wasn’t comfortable being affiliated with an organization endorsing products, according to Vice President James N. Katsaounis. “A proper retirement portfolio is one that is well-balanced and diversified, which may or may not include reverse mortgages,” he said.

Mayer, the Columbia professor and reverse mortgage company CEO, said many older consumers could benefit from the loans because they can never owe more than their house is worth even if real estate prices plunge.

A former economist at the Federal Reserve of Boston with a Ph.D. from the Massachusetts Institute of Technology, Mayer joined the Columbia faculty in 2004 and currently co-­directs Columbia’s Paul Milstein Center for Real Estate. He wrote his first paper on reverse mortgages in 1994, when the FHA product was five years old.

In 2012, Mayer co-founded Longbridge, based in Mahwah, New Jersey, and in 2013 became CEO. He’s on the board of the National Reverse Mortgage Lenders Association. He said his company, which services 10,000 loans, hasn’t had a single completed foreclosure because of failure to pay property taxes or insurance.

While many colleges let professors engage in outside business activities, Gerald Epstein, a University of Massachusetts economics professor who’s studied academic conflicts of interest, said Columbia may need to scrutinize Mayer’s arrangement closely.

“They really should be careful when people have this kind of dual loyalty,” he said.

Columbia said it monitors Mayer’s employment as CEO of the mortgage company to ensure compliance with its policies. “Professor Mayer has demonstrated a commitment to openness and transparency by disclosing outside affiliations,” said Chris Cashman, a spokesman for the business school. Mayer has a “special appointment,” which reduces his salary and teaching load and also caps his hours at Longbridge, Cashman said.

Likewise, Boston College said it reviewed Professor Munnell’s investment in Mayer’s company, on whose board she served from 2012 through 2014. Munnell said another round of investors in 2016 bought out her $150,000 stake in Longbridge for an additional $4,000 in interest.

She said she now prefers another approach: States allowing seniors to defer property tax payments. The advantages include “no fee, no paperwork and no salespeople,” she said. In one way, she’s glad she exited her reverse mortgage investments.

“Anytime I had a conversation like this, I had to say at the beginning that I have $150,000 in Longbridge,” she said. “I had to do it all the time. I’m just as happy to be out, for my academic life.”

 

Source: Copyright Bloomberg News – Business News 13 Mar 2019

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A first-time homebuyer’s guide to avoiding the house poor trap

Photo: James Bombales

Life likes to deal us surprises from time to time — a job loss, a chronic illness, an unfortunate fender bender. As a homeowner, any one of these sudden changes can throw you off your game, financially speaking, but if you’re house poor, even a minor expense change can have catastrophic consequences.

House poorness occurs when a large portion of your income goes towards your housing expenses, leaving little leftover for savings, discretionary spending or emergency funds. House poorness is not uncommon; an Ipsos poll by MNP published in January found that nearly half of Canadians are $200 or less away from being unable to pay their bills. A fluctuation in interest rates or a sudden expense can bring a house poor owner to their knees, Laurie Campbell, CEO of Credit Canada Debt Solutions explains.

“You’re really fighting a situation where anything that happens becomes too much,” she says.

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House poorness falls on a spectrum of intensity. For some, not having much financial wiggle room means no vacations or new cars. For others, it’s the difference between paying the mortgage and saving for retirement.

“The more serious version of house poor that I think people are just starting to see, and possibly for a couple more years, is people who not only can’t afford to do those discretionary spending types of things, but who also cannot save for retirement, save for children’s education, other things that are really important to do as well,” says Jason Heath, managing director of Objective Financial Partners Inc.

While the prospect of house poorness is frightening, it can be prevented through detailed planning, budgeting and thinking into the future. Campbell and Heath share how you can avoid house poorness, even before you sign those mortgage documents.

Want to retire? Buy from the bottom

While it’s expected that Canada’s hottest housing markets won’t cool off entirely this year, affordable housing remains inaccessible for many. Campbell is concerned that in the current market conditions, some new buyers are still purchasing above what they can afford. In the event of a interest rate rise, she says that those who’ve bought beyond their means could be on a course for financial hardship.

Photo: James Bombales

“Even a quarter point could result in immediate financial discord for a family that has really bought at the top of their income,” says Campbell.

Heath has worked with a number of clients, who, after several years of house poorness, have not been able to efficiently save for retirement. In order to recoup their losses, Heath says that house poorness has forced some homeowners to make downsizing an inevitable part of their financial plan. He fears that those overpaying in today’s market will follow the same fate.

“Particularly if and when home interest rates rise, mortgages payments will rise accordingly,” says Heath. “I worry that you’ve got a whole generation of young people who may be putting a lot of their retirement plans into their home as opposed to saving in a traditional manner.”

Preventing house poorness starts with buying at the bottom of the market, where the prices are the lowest, but Campbell adds that it also requires ignoring the pressures of needing to buy right now — home prices may decline further yet. By monitoring the price of homes in the markets in which you want to buy, you’ll build your knowledge of a fair evaluation of prices in your desired area and skip overpaying, Campbell explains.

“Even if you want to buy a house a year from now, start doing your research now,” she says. “Know what the real cost of housing in the area you want to buy is so you can make sure you’re evaluating the houses that are up for sale with experience.”

Taking on a smaller mortgage loan may also prevent house poorness, especially in the event of an unexpected income change. Borrowing under the maximum amount a mortgage lender approves you for, Heath says, leaves a good buffer in your financial budget in case any unanticipated changes should occur.

“I think it’s a really good lesson to people before they buy to appreciate that job loss happens, health issues happen,” says Heath. “There are extraordinary financial situations that you may not be able to anticipate that could put you into difficulty if you bite off more than you can chew in the first place.”

Skip the McMansion — think long term

Like we keep a spare tire in the event of a flat, or a box of bandaids for those little accidents, avoiding house poorness requires establishing some safeguards in case of unforeseen circumstances. This means having a well thought out financial budget, and a good cushion of emergency funds.

When it comes to budgets, Heath says it takes a very personalized approach to get it right. The mortgage stress test does not factor in personal spending, so financial budgets for homeownership should reflect your own spending habits and expenses.

“The mortgage qualification process does not take into account things like your discretionary spending or the activities that your children are enrolled in, for example,” says Heath. “You can have two families with the same income and the same mortgage approval, but spend very different amounts of money month to month on housing related stuff.”

Photo: CafeCreditFlickr

Beyond budgets, Campbell says it’s also important to account for the long-term lifestyle you’ll want under your mortgage. Owning a home in your early thirties with no children will mean different financial priorities compared to your late forties with post-secondary education fees and retirement in mind. It’s important that your mortgage accommodates your long-term savings and planned changes to family and income. Campbell says this starts with sticking to a budget.

“You don’t need the McMansion,” she says. “A lot of people think the bigger the house, the better it is and a lot of people regret that. So make sure that it’s within the budget that you have within an emergency fund that you need to develop around that budget and you’re able to do the things that you’ve wanted to do over time that won’t be impacted by the decisions you make with that home.”

Don’t give up everything

Owning a home ain’t cheap: there’s renovations, regular maintenance, seasonal upkeep and at least one emergency repair that you’ll need to fork out for at some point. Heath says that new home buyers tend to overlook these expenses — but they are critical to account for in any homeowner budget.

“I think it’s really important to, either on your own or with a professional, to try to assess what the true homeownership cost is going to be in that home,” says Heath. “Particularly, if you’re moving from a condo into a house, or from a rental into a homeownership position.”

Failing to accommodate regular home upkeep and extra costs in the budget can skew the true cost of homeownership. It can also be a drain on your finances. House poorness is marked by a lack of disposable income, which not only leads to skipping those needed repairs, but also the inability to go out and enjoy living life.

“People will often say, ‘We’ll give up everything to buy this house,’ but everything gets really boring very fast to have given up everything,” says Campbell.

Heath recommends making a detailed budget for the medium- to long-term financial outcomes of buying a home in order to assess true ownership costs.

Breaking up is hard to do

If you’re in a position of house poorness, don’t give up — there are options.

Campbell says that boosting your income is a good first step. You can do this by getting a part-time job, or creating side hustle from your home by renting out your extra rooms on Airbnb. But, if your mortgage payments have simply become too much, Heath says that you may need to consider selling and downsizing.

“There are situations where people need to consider the home that they own and whether it is too expensive,” he says.

If selling is the last resort, Campbell advises not to do so hastily. While there could be a mounting urge to get cash — and fast — selling quickly could cost you value in your home.

“Don’t wait until you really hit the dirt, and then try to sell your house, because chances are you’re going to have to sell it very quickly, and if you need to sell it very quickly, you’ll probably going to sell at a lower rate than you wanted to get,” says Campbell.

Source: Livabl.com –   

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What happens to your mortgage after you die?

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They say death and taxes are the only two constants in life, so the question is, what happens to your mortgage when you die?

The short answer, according to Donna Lewczuk, a mortgage agent with Dominion Lending Centres, is “If you’re single and have no insurance, the executor of the estate will sell the property and pay back the mortgage. If you are married you can continue with the mortgage if you are able to make the payments.”

That’s because the mortgage stays with the property, not the person or persons, says Mary Wahbi, a partner at Folger Rubinoff LLP who looks after estates. “Not much will happen when you die, the mortgage isn’t triggered on your death and isn’t payable then but it is still your debt.”

The debt remains even after you die. Mortgages are also considered secured loans and the lenders want their money and they will come after your estate to get it. Secured creditors have a leg up when it comes to loans and if there is security, like your home, they will get paid first.

If you’re the sole owner of the property and you have a will, the executor of the estate will have the authority over your estate. They can either sell the property and use the money to discharge the mortgage or if there is enough money to carry the costs, the mortgage can continue to be paid. If you die without a will, Wahbi says that someone will apply to the court for authority over your estate and then the same decisions will be made regarding your property.

If you bought your home with a spouse, more than likely you’re considered joint tenants (check your legal documents from when you bought your home). When one joint tenant dies, the other gets the home automatically by right of survivorship and the home doesn’t pass through the deceased’s estate. So the spouse can continue to make the payments if they can afford it and then when the mortgage comes up for renewal, they can decide if they want to keep the home and negotiate a new mortgage based on their financial standing or sell it.

Now if you bought the home with a friend, you’re not considered joint tenants. You’re considered tenants in common and the surviving person doesn’t have the right of survivorship. The share of the home, the asset, becomes part of the deceased’s estate and is distributed according to their will. Even then, as there is still a mortgage, the secured creditors are still the first ones to get paid out of the estate.

“Banks don’t care who’s paying the mortgage once they get paid,” says Wahbi.

Source: LowestRates.ca – By: Renee Sylvestre-Williams on January 8, 2019

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MultI-generational home purchases

Buying a house with Mom and Dad? In competitive housing markets, this seemingly unconventional choice can be a smart strategy for attaining homeownership sooner. That said, any financial partnership requires planning. Avoid conflict by clarifying roles and formalizing financial agreements. Here are two common shared homeownership scenarios, along with tips for making a financial arrangement that works for everyone.

FAMILY HOMEOWNERSHIP SCENARIO NO. 1:
Housing your child during university

Why: Renting can be expensive. Some parents may prefer to buy a home for their child while they attend university or college. This option allows families to build their own equity, rather than pay a landlord rent for three to five years or more.

Important considerations:
  • Size & lifestyle: Choose a home that is appropriate for a single young adult, such as a turnkey condo or small bungalow.
  • Future plans: What will happen once your child graduates? Will the property be sold? Will your child take over the mortgage payments? Discuss future plans openly to avoid unpleasant surprises.
  • Written agreement: Use a written agreement to solidify co-ownership responsibilities and expectations, including who is financially responsible for specific homeownership expenses (i.e., mortgage, utilities, taxes and so on), what happens if payments are missed, and what happens if either party wishes to exit the financial partnership.

Ask your mortgage professional about… Genworth Canada’s Family Plan program. This program enables qualified buyers with excellent credit to assist an immediate family member with their home purchase. To qualify, your dependent must have good credit, even if they lack sufficient income to meet typical mortgage qualification standards. The home must meet certain quality criteria, and qualified buyers can make their purchase with as little as five per cent down.

FAMILY HOMEOWNERSHIP SCENARIO NO. 2:
Parents and adult children living together

Why: Forget fleeing the nest. Increasing numbers of adult children are buying a bigger nest with Mom and Dad (maybe even Nan and Gramps too!). According to the 2016 census, a whopping 403,810 households across Canada are multi-generational households with at least three generations of the same family under one roof. Whether you’re inspired by tradition, cost savings or convenience, shared homeownership can be a prudent and fulfilling decision.

Important considerations:
  • Size & lifestyle: Upfront, family members should be on the same page about living arrangements. Will this be a one-household home with shared living quarters? Or will the property be divided into suites, with each household residing in a self-contained unit?
  • Future plans: Involve the whole family in discussions around shared homeownership and include adult siblings who are not buying in with you. Be frank about family assets and the future care needs of older relatives. Is there an expectation that you shoulder this responsibility due to proximity?
  • Written agreement: As with any shared homeownership situation, clarify co-ownership responsibilities and expectations in a written agreement.

Ask your mortgage professional about… Genworth Canada’s Progress Advance program, which helps qualified homebuyers finance a custom-built home with as little as five per cent down. Dual master suites? A bachelor-size nanny suite? An approved home builder or contractor can create a house perfect for your multi-generational family’s needs.

Or, if you’d prefer to renovate a resale home, ask about Genworth Canada’s Purchase Plus Improvements (PPI) program, which can finance home improvements and combine them with your mortgage in one easy mortgage, also with as little as five per cent down. Check out our PPI calculator and guide at homeownership.ca/ppi.

Finally, if your family has immigrated to Canada within the last five years, consider Genworth Canada’s New to Canada program. Don’t let a lack of Canadian credit history derail your family’s homeownership dreams. The New to Canada program can help qualified borrowers who have full-time employment and a strong history of rent and utility payments in Canada buy their family home with as little as five per cent down.

Source: HomeOwnership.ca 

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