Brokers who work with 55+ homeowners know this conversation well.
The client has substantial equity, a home they would like to stay in and a plan that finally seems to fit. They may be house rich, cash poor, and a CHIP reverse mortgage looks like the right solution.
Then the numbers come back, and the reverse mortgage covers most of what has to be paid out—but not all of it. Or a client who already has a reverse mortgage calls a few years later because their needs have changed and they need a little more cash in hand.
In many cases, a second mortgage behind a reverse mortgage in Ontario may help close the gap while the reverse mortgage stays in place.
Tembo Financial can support 55+ homeowners by considering second mortgages behind CHIP reverse mortgages across Ontario. Here is where these files tend to come from and how we look at them.
These files generally arrive in one of two ways.
The first situation comes up while the client is moving away from traditional financing and into a reverse mortgage. They may be refinancing a bank mortgage, and possibly other debts, into a CHIP reverse mortgage. Once the payout figures are confirmed, the amount available through the reverse mortgage may fall short of what has to be paid out.
Without a plan for the difference, the refinance could stall, and the client may be left carrying the payments they were hoping to pay out.
That was the situation for a Hamilton-area homeowner named Joan. Joan was refinancing a bank mortgage into a CHIP reverse mortgage, and there was still a $100,000 shortfall.
In June, Tembo provided a $100,000 second mortgage at 55% loan to value. Together, the reverse mortgage and Tembo’s second helped consolidate debt and free up monthly cash flow.
The exit was part of the plan from the beginning. The second was set up on principal and interest payments, so Joan can repay it over time, making a refinance easier in the next couple of years.
The second situation involves a client who already has a CHIP reverse mortgage. Their needs may have changed since it was arranged. They may want to pay out high-interest debt that has built up. They may also want to retrofit the home so they can age in place for longer.
Consider this illustrative example.
The client owns an Ontario home valued at approximately $950,000, with a CHIP reverse mortgage balance of about $310,000. They would like to add a main-floor bathroom, widen a few doorways and update the front entrance, at an estimated cost of about $45,000. They are also carrying about $20,000 of credit-card balances.
A $75,000 Tembo second mortgage could cover the work and pay out the balances, along with applicable financing and closing costs.
The combined borrowing would be about $385,000, or approximately 40% of the home’s value. That is well below Tembo’s typical residential loan to value of 65% behind a CHIP, which matters because the reverse mortgage balance grows over time.
The second would be set up on principal and interest payments, so the client slowly pays it down. The exit could be a refinance, a sale of the home or, eventually, the estate.
In this example, the client could keep their reverse mortgage, complete the work and replace several credit-card payments with one scheduled mortgage payment.
A second behind a reverse mortgage is reviewed with tremendous care, with the client’s suitability top of mind. An approval rests on the equity in the property, overall monthly affordability and whether the exit strategy and its timeline make sense.
Every application should begin with the exit. On these files, the exit may be:
In a perfect world, the second is set up on principal and interest payments, so the client slowly pays it down over time. Tembo lends across Ontario, including rural areas, supporting 55+ homeowners where they need us.
A reverse mortgage balance grows over time. As it does, the remaining equity in the home may shrink, particularly if the property’s value does not keep pace.
That is why Tembo looks closely at the combined loan to value: the reverse mortgage balance plus the proposed second, measured against a supported value for the home.
Tembo’s typical residential loan to value is a maximum 65% behind a CHIP reverse mortgage. On these files, a lower starting point may leave more room as the reverse mortgage balance grows. Both examples above sit below that range, at 55% and about 40%.
Trust matters. Clients should be able to understand exactly what they are signing, what it costs and have a clear plan on how their second mortgage will be repaid.
There are no set-up fees with Tembo. The lender fee, broker fee and discharge fee are disclosed up front, and legal fees are low and all-in.
The client’s own lawyer reviews the documents with them, so they can understand the terms, the payment and the plan before they commit.
Many reverse mortgage specialists stay in touch with their clients long after the file closes. A simple check-in call may uncover a need before it becomes urgent.
You might say:
“I like to check in with my reverse mortgage clients from time to time to make sure the plan still fits. Sometimes needs shift over time, whether that is debt that has built up or updates to the home so you can age in place with peace of mind. If this sounds like you, there may be a way to access a little more of your equity without changing your reverse mortgage terms. Would it help to talk it through?”
Focusing on the client’s needs and connecting with them throughout their mortgage provides a strong level of customer service that makes a huge difference.
If a shortfall appears during a new application, the conversation can be just as direct:
“The reverse mortgage covers most of what we need to pay out your existing bank mortgage, but not quite all of it. There is a lender that may be able to place a second mortgage behind the reverse to cover the difference. It would generally have a regular payment that slowly pays it down, and your own lawyer would review everything with you.”
A short, organized submission can help us give you feedback sooner. Please include:
Tembo reviews files quickly so brokers can expect to receive initial deal feedback in as little as one hour.
A CHIP reverse mortgage shortfall does not have to ruin the homeowner’s plans.
For reverse mortgage brokers in Ontario, these files can be a chance to show clients that you are still looking out for them—years after the first transaction.
Tembo provides the second mortgage. You keep the relationship, guide the plan and stay involved through to the exit.
Have a reverse mortgage client who needs a little more? Call Tembo Financial at 416-238-6717 or visit www.tembofinancial.com, and let’s see whether there is a path forward.
Client names and identifying details have been changed. The second example is an illustrative scenario. Neither example represents a guaranteed approval, timeline or funding outcome.
All applications are subject to Tembo Financial’s underwriting criteria, satisfactory documentation, property review, available equity and fulfillment of all funding conditions.