The economic landscape for young Canadians can be a rugged terrain to navigate. They face uncertainty due to increased interest rates and inflation. This can be frustrating for those just beginning to build their career, considering buying a home or starting a family. If you are a parent, you may wonder how to support your child during this time. The CHIP Reverse Mortgage offers a financial solution that can help you provide a tax-free gift to your loved ones.

One way to support your adult children is by providing them with an early inheritance. This can help them pay for their wedding, start a business, pay off student loans, make a down payment on their home, or use the funds to improve their lives in other ways. By giving an early inheritance, you can avoid probate fees and potentially save money by lowering your tax bracket. Speak to your tax specialist for more information.

You may have considered using a home equity line of credit (HELOC) or liquidating your investments to provide an early inheritance. However, there are disadvantages associated with these options. This includes loss of earnings or tax payable when it’s time to sell your investments. The CHIP Reverse Mortgage offers a solution that allows you to unlock up to 55% of the equity in your home without these challenges. Your investments remain intact, and you are not required to make mortgage payments, so your income is not affected. Best of all, the funds you receive from the CHIP Reverse Mortgage are tax-free!

The CHIP Reverse Mortgage can help you support your loved ones. Contact Vinil for more information.

A second mortgage is a mortgage that is taken out against a property that already has a home loan (mortgage) on it. Generally, people take out second mortgages to satisfy:

• Short-term cash or liquidity requirements
• Have an investment opportunity
• Pay off higher-interest debts (such as credit cards and student loans)

If you are considering a second mortgage for any reason, here are a few key points to keep in mind:

Second Mortgages and Home Equity

Your second mortgage and what you can qualify for hinges on the equity that you have built up in your home. Second mortgages allow you to access between 80 and 95 percent of your home equity, depending on your qualifications.

For example, if you seeking 95% Loan-to-Value loan (“LTV”):

House Value =                                                       $850,000
95% LTV (maximum mortgage amount)               $807,500
less: First Mortgage                                               ($550,000)
Amount Available Through Second Mortgage     $257,500

Second Mortgages and Interest Rates

When it comes to a second mortgage, these are typically higher-risk loans for lenders. As a result, most second mortgages will have a higher interest rate than a typical home loan. There is also the option of working with alternative and private lenders depending on your situation and financial standing.

Second Mortgage Payments

One advantage when it comes to a second mortgage is that they have attractive payment factors. For instance, you can opt for interest-only payments, or you can select to pay the interest plus the principal loan amount. Work with your mortgage broker to discuss options and what would work best for your situation.

Second Mortgage Additional Fees

A second mortgage often comes with additional fees that you should be aware of before going into the transaction. These fees can vary widely but often are a percentage of the mortgage.  Other fees to consider include appraisal fees, legal fees to set up the second mortgage, and any lender or broker administration fees (particularly with alternative or private lenders).

Second mortgages are a great option for many homeowners. It may be a better solution than a refinance or a Home Equity Loan (HELOC). If you want to find out if a second mortgage is right for you, don’t hesitate to reach out to Vinil.

Many people are avoiding longer-term fixed mortgages, expecting rates to go down. Here’s why you should consider a 5 Year fixed rate for your mortgage in this market.

• The Bank of Canada raised overnight rates by 25 basis points last week. This means variable rates are high and may increase even more in 2023.
• You can break a fixed-term mortgage when rates come down. Be sure to get a fixed rate that has a low penalty. Typically, banks will charge a higher fee than monoline lenders for breaking fixed terms.
• Right now, 5 year fixed rates are approximately 2% lower than variable rates. This means that you’re more likely to qualify for a fixed rate and maintain a stable payment structure.

Contact Vinil at (250) 309 5482 to schedule a no-obligation appointment regarding your next mortgage term.