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My name is not Elaine
From time to time I have calls from clients who are retired or self-employed that have substantial net worth but little income on paper.
These clients often own their homes clear title or have minimal mortgage balances.
For whatever reason, they are now looking to pull some of that equity back out of their homes. Some of the common reasons these clients are looking to refinance include:
- Helping their children with a down payment for a home
- Purchasing a second residence, like a winter getaway home or rental property
- Consolidating debts to improve cash flow
- Pulling money to take advantage of investment opportunities
- Buying another asset such as a new vehicle
Under mortgage rules, despite significant net worth and a history of managing their credit responsibly, these clients sometimes struggle to be approved for a mortgage.
The good news is that there are several great options available.
For clients who are over 55, several companies in Canada offer reverse mortgages. Reverse mortgages have had a bit of a bad rap because of what has happened in the U.S. reverse mortgage market. In Canada, they are highly regulated to protect consumers.
People have mixed opinions about reverse mortgages. I admit I had a negative opinion myself. However, after helping several seniors stay in their homes or regain positive cash flow to enjoy their retirements I definitely feel there is a time and a place for reverse mortgages.
For clients who are not over 55 or not interested in reverse mortgages, there are several lenders that offer mortgages specifically for clients with high net worth that don’t qualify under the standard mortgage rules.
The very short version is that these mortgage products consider the percentage of equity you have in your home and the balance of your liquid assets (ie: your investment portfolio).
One of the things I discuss with my clients who are in their mid-40s and refinancing or buying a home, is setting them up with credit for down the road when they may need it. In my experience it is much easier to qualify for credit while you are still working and don’t need it, as compared to waiting until you are retired and an emergency comes up.
If you find yourself in this situation we are happy to chat about some of your options.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.
