Bloom Financial Company has entered the reverse mortgage market with a new product for Ontarians aged 55 and over.
The fintech firm intends to roll out the product, which allows senior homeowners to access up to 55% of their home’s value in tax-free funds, in other provinces soon. In a news release, Bloom said the interest-only mortgage product will only require payment when the homeowner moves out, sells the home or passes away.
“Canadians over 55 have more than $1 trillion of wealth built up in their homes, but many are retiring without enough savings to maintain their standard of living throughout their full retirement,” Ben McCabe, founder of Bloom, said. “Canadians need a simple, comfortable way to access home equity as part of their overall retirement strategy.”
Reverse mortgages are niche products in Canada but not elsewhere, like the United Kingdom, where wealth advisors commonly recommend the product for retirement planning. However, with reverse mortgage rates declining and home equity surging, concerns about the product are dissipating.
“Attitudes are shifting around home equity release solutions, and people are rethinking the idea that a responsible retirement plan means ignoring a fully equitized home. With the rise in home prices in recent years, more and more 55+ Canadians are beginning to realize just how wealthy they are, when they consider their full financial picture,” McCabe said.
“Our vision is to make home equity seamlessly accessible as a tool to support retirement. We believe Canadians have a right to a standard of living in retirement that is aligned with their true wealth, which by definition includes the wealth they’ve built in their homes.”
Noting that HomeEquity Bank and Equitable Bank are the two dominant lenders in the reverse mortgage space today, mortgage broker Frances Hinojosa says more consumer choice is a good thing because they typically benefit from competitive pricing. Hinojosa added that baby boomers will soon comprise a quarter of Canada’s population and it’s about time they were offered more choice.
“Consumers have more choice as more lenders and innovative companies, such as this fintech company, start to open their eyes to the opportunity and the solution needed for this age group,” Hinojosa, managing partner of Tribe Financial, said. “Baby boomers make up almost 20% of the Canadian population and they will increase to 25% in 10 years. The majority of baby boomers own their home and they can access equity. Now they can give an early inheritance to their kids to allow them to purchase their own home or use that money to their benefit. They will also be able to cover unforeseen costs to their own homes if they don’t want to move into a retirement facility.”