Instead of monthly payments, now there is a new solution whereby customers may take out loans with interest rates tied to the appreciation of the home’s value. It is designed primarily for existing homeowners who wish to refinance or to do an ‘Equity Take-out’.
Similar in function to a Reverse Mortgage, there would be no monthly mortgage payments as required under conventional mortgage loans.
Who is eligible?
Homeowners are qualified if they:
- Want or need to pull equity out of their home without monthly payments.
- Have a minimum of 640 credit score.
- Are interested in pulling equity out of their home at fair rates.
- Are homeowners of any age.
- Are looking for a home equity solution that does not have prepayment penalties or early buyout penalties.
Need Funds? Don’t Sell Your Assets !
Consider this scenario — as the homeowner, you wish to access funds but aren’t sure which source of capital to tap first. The simplest way to decide is to look at the cost of drawing from each source.
RRSP withdrawals and capital gains are far more costly than tapping one’s home equity. Instead of monthly rates, the interest rate is payable upon the sale of the home.
How does it work?
If, for instance, a home appreciates an average of 5 per cent over a five-year-term, 5 per cent then becomes the effective rate.
If a home depreciates in value, a minimum rate of 3.49 per cent would apply.
For homes that appreciate significantly — a trend Ontarians can attest to — a maximum rate of 7.99 per cent would apply.
If you have 60 per cent down on a home, it may be possible to purchase the home with no monthly payments.
On the typical home in Toronto, now priced at approximately $1.1 million, the buyer would be required to put down $660,000 cash to secure financing.
In the same way as a Reverse Mortgage, this concept is ideal for older adults eager to age in place but faced with insufficient retirement funds to cover the cost of their healthcare and other expenses.
I would be delighted to discuss the above concept with you at any time.
For more information on the above:
Terry Lynch (416) 315-1787,