You are currently viewing Reverse Mortgage – Case Study #2

Reverse Mortgage – Case Study #2

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

The client came in quite timid and embarrassed about her financial situation. She is 56 years old and on a limited income however she did own her home with only a small mortgage remaining. The source of her financial hardship came from a line of credit and credit card debts all at their maximum limits. Between the mortgage and lines of credit, she was just paying down the minimum balances but barely. There was almost nothing left over for the other necessities like food and forget about entertainment.

Property Value: $475,000, she was qualified for $141,495 (approximately 30% of her equity)

The interest rate at the time was 6.24%.

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.

As you can see in the chart, there is still plenty of equity left in the house. Below is a table of the data in the chart on page 1.

Table 1 – Financial Illustration of Charted Data

YearsHouse ValueBalanceEquity Remaining
0$475,000$141,495$333,505
1$489,250$150,462$338,788
2$503,928$160,024$343,903
3$519,045$170,166$348,880
4$534,617$180,950$353,667
5$550,655$192,417$358,238
6$567,175$204,645$362,529
7$584,190$217,615$366,576
8$601,716$231,406$370,310
9$619,767$246,071$373,697
10$638,360$261,709$376,651
11$657,511$278,294$379,217
12$677,236$295,931$381,306
13$697,554$314,685$382,869
14$718,480$334,684$383,796
15$740,035$355,894$384,141

With the Reverse Mortgage, we were able to pay off the small mortgage, line of credit and various credit card debts saving her approximately $1,700 per month. She was absolutely thrilled that we were able to help her navigate this and remove the overwhelming feeling of being crippled with debt. It’s cases like this that make our work here so fulfilling.

In 15 Years she will still have at least $384,141 in equity. As there is considerable equity left she could always access more of her equity in the future should she decide that she needs to.

If you have any questions or concerns regarding this case study, please do not hesitate to contact us.

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.