Reverse mortgages to be considered by CMHC as possible solution for low-income seniors
Norma Greenaway
Sun
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OTTAWA — The federal government is exploring options for helping seniors who may be house-rich but cash-poor. With an eye to easing the financial worries of low-income homeowners, Housing Minister Joe Fontana has asked the Canada Mortgage and Housing Corp. to investigate models for government-backed reverse mortgages. Reverse mortgages for seniors are not new in Canada. But at this point they’re strictly private-sector, the sole domain of the Canadian Home Income Plan. The plan enables seniors who’ve paid off their homes to borrow against the value of those homes. The loan and accumulated interest are paid when the house is sold or the homeowners die. Tony Ianno, federal minister responsible for seniors, says he suspects low-income seniors would feel more comfortable tapping into a reverse mortgage program if it was insured by the government. “Often people are afraid to do a deal regarding their home, taking into account they want to leave it to their family,” Ianno said. “Their nervousness is high.” Ianno says he wants to eliminate the prospect of people being forced to sell their homes because they can’t afford to fix the roof and pay other bills. “What we are trying to do is reduce that stress level,” Ianno said. The idea is part of a broader effort to help struggling seniors. The government has already moved to raise the Guaranteed Income Supplement for the poorest seniors, and to expand rental supplements and the supply of affordable housing units. Ianno said a government-insured reverse mortgage plan would give homeowners an added sense of security. It also would be able to offer lower interest rates because there would be no requirement to make a profit, he said. Steve Ranson, president and CEO of the Canadian Home Income Plan, questioned the need for the government to get involved in the reverse mortgage business. “I don’t actually know what the government would bring to the product,” he said, stressing there is no income criteria in the CHIP program. The Canadian Home Income Plan reverse mortgage has attracted about 6,000 customers so far, Ranson said. It allows homeowners 62 years or older to borrow up to 40 per cent of the value of their home. Homeowners must borrow at least $20,000, and take that sum in a lump sum off the top. In return, the Canadian Home Income Plan gets a priority lien on the home when ownership changes hands. The debt is capped at the value of the home. Ranson said demand for reverse mortgages has been rising steadily in recent years. Making use of the mortgage © The Vancouver Sun 2005 |
