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Reverse Mortgage – Case Study #1

Below is a real scenario of a wonderful couple that I had the pleasure of helping.

The clients were a wonderful vibrant couple of 80+ years young living in Northern British Columbia. They wanted to go in together with their son on a rental property in the hot real estate market of Southern British Columbia. Since they were accessing their equity it was the perfect time to eliminate a couple of small monthly liabilities too.

Property Value: $225,000, they were qualified for $108,495 (approximately 48% of their equity)

The interest rate at the time was 5.59%

For illustration purposes only, we are using a conservative housing appreciation of 3% (according to the Canadian Real Estate Association – May 01, 2016, the 15-year national house appreciation average is 7.5%) Also according to one of our lenders, the average time it takes before they receive repayment of the loan is 14 years. We will use 15 years to see how the equity stands up.

Table 1 – Financial Illustration of Charted Data

YearsHouse ValueBalance OwingEquity Remaining
0$225,000$108,495$116,505
1$231,750$114,645$117,105
2$238,703$121,143$117,560
3$245,864$128,029$117,835
4$253,239$135,286$117,954
5$260,837$142,954$117,883
6$268,662$151,056$117,605
7$276,722$159,643$117,079
8$285,023$168,691$116,332
9$293,574$178,253$115,321
10$302,381$188,357$114,025
11$311,453$199,063$112,390
12$320,796$210,346$110,450
13$330,420$222,269$108,151
14$340,333$234,867$105,466
15$350,543$248,217$102,325

As you can see by the end of 15 years the clients will still have at least $102,325. If you have any questions or concerns regarding this case study, please do not hesitate to contact me.

Kevin Ovelson

I have lived in the beautiful Okanagan Valley for most of my life. In 2011, I married my childhood sweetheart and have been happily married with an amazing son ever since. Since becoming a Mortgage Professional and Certified Reverse Mortgage Specialist I have been fortunate to help some amazing people with the most important purchases they will ever make. Being able to assist, or in some cases help to get someone back on track, has been so incredibly rewarding for me.