Approvals, Credit and Income….What do we look at?
Our approvals are based primarily on age, number of applicants, and then property type/location/value.
Maximum approval is 55% of the value of the home, but eligible amount varies based on the above. In general, the older the client, the more they are approved for. The younger the client, the less they are approved for. Also, detached homes receive more than strata properties.
We have to check credit (we pull Trans Union), and we have to ask about income. There is no mortgage payment on a reverse mortgage, so income is just to know they earn enough to support basic housing obligations like property taxes, insurance, and strata fees if applicable. In general, you can just “state” income if the credit is clean and 630+. If the credit is damaged or below 630, we will likely ask for proof of income. If it’s just basic pension income, typically just a bank statement with name, address, and the CPP and OAS deposits would suffice.
PSA – Property Set-Aside – Occasionally, a file with poor credit and/or income, my trigger something we call a PSA, which is basically a holdback. It’s our way of showing our regulator (OSFI), that we didn’t give the client all the money to spend right up front. Instead, we reduced the initial amount they can access, and reserved some funds that we issue almost as an allowance every 6 months for a period of time depending on their age. This is to help ensure they have funds available throughout each year for things like property taxes and insurance.