Meanwhile, Equitable Bank has introduced a new reverse mortgage closing process, which it said “maintains the integrity clients expect … at a fraction of the cost and time” that the old process took. Under the new process, clients in Alberta, British Columbia and Ontario can have Equitable Bank work directly with their independent lawyer to verify identification, register and fund the mortgage, eliminating the need to retain two lawyers.
“At Equitable we continually challenge ourselves to find better ways to bring more value to our customers by removing complex and unnecessary traditional banking practices,” said Paul von Martels, VP of Prime and Reverse Mortgage Lending, Equitable Bank. “It’s our ambition to bring the reverse mortgage solution into the retirement financing mainstream.”
Both banks see a rising trend in reverse mortgages as the logical outcome of the aging, house-rich Canadian population with longer life expectancies and shortfalls in workplace pensions and cash. For many seniors, the prospect of downsizing is a non-starter as the cost of rent skyrockets in many hot real estate markets.
Critics flag the products as high-cost solutions, with interest rates typically higher than those for conventional mortgages. A report by Bloomberg in September said that HomeEquity Bank and Equitable charge 5.74% for a five-year fixed mortgage, compared to conventional five-year fixed mortgages offered online for as low as 2.4%. More recently in December, the Globe and Mail reported that Equitable is offering lower “Lump Sum Reverse Mortgage Rates” that are as low as 4.59%, though those are available only if borrowers take the full amount their approved for up front.
“Our time horizon for getting the cash is much longer, and generally the longer you wait for your cash to come back to you, the more you need to charge,” Atul Chandra, chief financial officer at HomeEquity Bank, told Bloomberg in September.