Pattie Lovett-Reid is a highly respected Canadian financial expert known for her expertise in personal finance. Starting as a bank teller right out of high school, she climbed the ranks in the investment world, eventually serving as Senior Vice-President at TD Waterhouse Canada Inc.
In 2012, Lovett-Reid became the Chief Financial Commentator at CTV News, providing valuable financial insights on various platforms. Her ability to simplify complex financial concepts into practical advice quickly made her a respected figure in the industry. She continues to be a sought-after commentator and currently serves as the Chief Financial Commentator at HomeEquity Bank.
Lovett-Reid is a Certified Financial Planner and co-author of national bestselling books. Her contributions to financial planning in Canada have earned her prestigious awards, including the Donald J. Johnston Award and the Financial Planning Canada Fellow of Distinction. Pattie Lovett-Reid splits her time between Toronto and Muskoka, Canada, where she resides with her husband, children, and grandchildren.
In my interview with Pattie, we discuss:
1. The challenges of being house rich and cash poor
2. Reverse mortgages
3. The importance of applying for a mortgage before retirement
4. Downsizing not happening with as many baby boomers
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Full Transcript
Sean Cooper
Welcome to the Burn Your Mortgage Podcast. I'm Sean Cooper and it's great to be back for another episode. On today's show I'll be talking to Pattie Lovett-ReidPattie. Lovett-Reid is a highly respected Canadian financial expert known for her expertise in personal finance. Starting as a bank teller right out of high school, she climbed the ranks in the investment world, eventually serving as Senior Vice-President at TD Waterhouse Canada Inc.
Sean Cooper
In 2012, Lovett-Reid became the Chief Financial Commentator at CTV News, providing valuable financial insights on various platforms. Her ability to simplify complex financial concepts into practical advice quickly made her a respected figure in the industry. She continues to be a sought-after commentator and currently serves as the Chief Financial Commentator at HomeEquity Bank.
Lovett-Reid is a Certified Financial Planner and co-author of national bestselling books. Her contributions to financial planning in Canada have earned her prestigious awards, including the Donald J. Johnston Award and the Financial Planning Canada Fellow of Distinction. Pattie Lovett-Reid splits her time between Toronto and Muskoka, Canada, where she resides with her husband, children, and grandchildren.
Sean Cooper
In my interview with Pattie, we discuss:
1. The challenges of being house rich and cash poor
2. Reverse mortgages
3. The importance of applying for a mortgage before retirement
4. Downsizing not happening with as many baby boomers
Sean Cooper
And before we get started with the interview, I just want to say that this was one of my favorite interviews that I've ever done. I remember doing my first ever TV appearance with Pattie Lovett Reid back in the day, many years ago. And it was such a great experience. So it's nice for it to come full circle and to actually be able to interview Patti instead of the other way around. She's interviewed me a few times over the years. So it was a fun experience to be able to interview Patti after all these years. Without further ado, here's my interview with Pattie Lovett-Reid.
Sean Cooper
Hi Pattie, how are you doing today?
Pattie Lovett-Reid
Sean, I am great. Thank you for asking. And by the way, thanks for having me on.
Sean Cooper
Oh, it's an absolute pleasure. I'm sorry that it took so long. But I wanted to wait until I had quite a few episodes here before asking high profile guests like yourself there. So it's a pleasure to have you on the show. And maybe it's a bit strange for you to be on the other end here not interviewing me like you've interviewed me in the past. But I'll try not to go too hard on you.
Pattie Lovett-Reid
Wow, you can go ahead and try, because I certainly tried with you. And you know, just for the record Sean, I remember interviewing you years ago, on BNN Bloomberg, and you were a great interviewer because many people just didn't believe that they could pay off their mortgage. And you were so compelling and so convincing. I'm not even sure if I told you the type of feedback that I got from viewers. I mean, it was a tough job, but you got the job done.
Sean Cooper
Thanks so much. That really means a lot coming for you. And you're a huge inspiration as well. And definitely enjoyed all your segments over the years here and excited to talk about the next chapter of your career as well, that we'll be discussing today also.
Pattie Lovett-Reid
Great. Okay, so let's go over to you, my friend.
Sean Cooper
Perfect. Thank you so much. So yes, I just wanted to focus on today. The challenge of a lot of older Canadians is facing the typical situation. I'm sure that you hear it all the time of house rich and cash poor. I know that, but that's an issue for people because most of them don't have a gold plated pension plan unless you were lucky enough to work with the government there. But I'm just curious, like, what are some challenges that you're seeing around home ownership, any other challenges?
Sean Cooper
And yeah, if you're finding yourself in this situation of being house rich and cash poor, what are some options there? I mean, the most obvious one is selling your property but everybody needs a place to live. If you sell your property, then you have to start renting and that's not cheap by any means. So maybe you can speak about what are some options available to seniors that find themselves in that situation or people that are getting close to their senior years, I guess?
Pattie Lovett-Reid
Well, Sean, you're right. There are many people out there that find themselves in a very, very difficult situation, we continue to combat higher inflation, I know it's come down. But it certainly isn't low, when you look at core inflation, interest rates have continued to move higher aggressively. When you look at our Canadian dollar, it has, by many standards, been viewed as a currency that's undervalued. But when you think about all the things that we import here in Canada, fruits and vegetables, I mean, the list goes on and on. Canadians are paying a lot more for a lot of things.
Pattie Lovett-Reid
And so one of the things that I've often talked about is, you could spend a third of your retirement in retirement, or near retirement when you think of your whole life. And you have to give yourself permission to explore all of your funding options. And I do think, Shawn, from when I started in this business, I used to say kind of tongue in cheek if I'm honest, well, you can't eat a brick in retirement, meaning you're not going to include your home in your retirement planning. Because to your point, Sean, you need somewhere to live.
Pattie Lovett-Reid
And then I started to think about it that people have a tremendous amount of value locked into their homes, and they may not have been able to save and to your point, they may not have had that wonderful pension, you know that somehow, but I'm going to say fewer and fewer. And so Shawn, I think it's at a point, given where we've watched the values of real estate, the economic climate, the fact that we have a more mature demographic, that it's time to sort of give yourself permission to access some of the equity that you've built up in your home. And we can talk more about it, because it's not just one strategy. But definitely the chip reverse mortgages. One that I'm happy to talk to you about.
Sean Cooper
Sure that sounds great, Pattie, and yes, there are definitely some big challenges working against you today, if you don't have that gold plated pension plan, for example, Canadians are living longer and longer with each passing year. And that means that you need those retirement savings to last you longer and longer. And also with the record high inflation that we're seeing it has come down. But that just means it's eating up more and more of your savings. And if you're not one of the lucky few who has the majority of their retirement money indexed to inflation, like you might have CPP, and old age security, but that's barely enough to buy groceries and maybe fill up gas and your cars.
Sean Cooper
So yeah, definitely, that we have some things working against us. So yeah, maybe you can talk about, like, what's an option like the reverse mortgage and other things available to people? Because yeah, if you sell your property, renting isn't cheap these days, and you also don't get that same stability of home ownership, like when you rent, you may be forced to move because the homeowner decides to sell the property. So yeah, like some people just like having that roof over their head. So yeah, maybe you can talk about some options available to people who want to stay in their property, but also need money to put food on the table.
Pattie Lovett-Reid
Right. So what I can do is I can share with you some of the research that's been done out of the University of Alberta, in conjunction with FP Canada, and they talk about I'm not sure that they call them schemes, but that's how they refer to them. But it's about, you know, home equity release schemes, or what I would prefer to call it strategy. So getting money out of your home.
Pattie Lovett-Reid
And the first is a reverse mortgage. And yes, I am the Chief Financial Commentator, for Home Equity Bank. So in the interest of disclosure, I can tell you that for the longest time, this was not a product I supported. I think it's a misunderstood product. I think some of the offerings are between Canada and the US. Confusion has mounted. People have told me that they thought they'd be thrown out of their home, if home equity decided that, no, that's not the case. Or they'd be forced to make payments on the money that they were able to take out of their home. No, that's not the case. And the tax implications are very different in the US and Canada. Because in Canada, it's tax free, it's not in the US.
Pattie Lovett-Reid
And so there are different products and I think for the longest time, the CHIP Reverse Mortgage was definitely one of the most misunderstood financial products that There was going, but I think those times are changing. And I see that in the numbers. But when I talk about taking value out of their home, I mean, yes, there is a reverse mortgage, there is a home equity line of credit, you could maybe take out a second mortgage on your home, you could refinance your home, you could sell and move into a smaller home, sell and rent a place, which you've already referred to. And yes, rents are escalating.
Pattie Lovett-Reid
And you could even think about selling and renting it back from the new buyers. I mean, there are options. And I think that sometimes when a product is misunderstood, and people don't really fully appreciate that it might be the right product for them Sean, but it's not the right product for everyone. But for something you never know if you don't actually look into it. And so I do think funding options are a very, very hot topic, you talk about the fact that people may or may not want to rent, they may not want to relocate, I can tell you coming out of the pandemic, I have read numerous reports, and people want to stay in place.
Pattie Lovett-Reid
And in fact, if I think about the real estate market, there is such a desire to stay in place. It's not freeing up inventory for younger families that could be moving into these family homes. And so that in itself is a challenge. But those who have been smart enough to put some money aside, have benefited from years of home ownership, you know, you have access to what I would call an emergency fund to help fund your retirement. And when you talk about the government benefits, Old Age Security, CPP may be guaranteed income supplement, those programs were never put in place to fund your retirement, they were put in place to supplement your retirement.
Pattie Lovett-Reid
And so to your point, for those who may still have a small mortgage, and by the way, if you do take out a reverse mortgage, you will never take out more than the value of your home, you're limited to 55% of the value, you do have to be over the age of 55. But I can tell you typically people take out much, much less than that, and actually extrapolate some of the value later in life. And it's roughly in their early 70s, where they think I want a little financial flexibility. And I'm going to explore this.
Sean Cooper
Now thanks for sharing so many great points there, Pattie. And something really unique about the reverse mortgage as well, that can work for certain older Canadians as well is that certainly, as mentioned, you can look into the other options like the second mortgage and the Home Equity Line of Credit there. But for people where their cash flow situation is rather tight, that may be a challenge for them, because they have to make payment there. Whereas with the reverse mortgage, isn't it unique in the sense that you don't have to make any payments at all, you can basically draw the money to live on. And there's no minimum payment requirement because that's what like not just older Canadians, but that's something that many people are struggling with right now, whether it's variable mortgages or home equity lines of credit, they've seen their payment balloon, like what the rate is going up as much as they have over the last like year and a half year.
Sean Cooper
So I mean, if you're looking to access equity from your property, and you're concerned about higher payments, the higher interest rates situation and reverse mortgage could really help us because it doesn't have the minimum payments.
Pattie Lovett-Reid
Yeah. And you know what, thank you for raising that, because that is absolutely right. And I think it's because every other option that I just sort of listed down from the research done by the University of Alberta, they all wind up costing you financial outlay associated with it. Now I also hear the argument from people, they'll say, Well, it's very expensive. And yes, this is because you don't have to make any payments, mortgage payments, you are going to be charged a little more than what you're going to be charged for conventional mortgage. But really, to the extent that I've been able to figure out the real cost, you have to have your home appraised and there is a cost and you need independent legal advice, not for a home equity bank, but they want to ensure anybody taking out a reverse mortgage really understands it.
Pattie Lovett-Reid
Now, people will often say to me, I just don't want to tap into this because what if I need the money down the road for long term care? Don't forget, and you're in the market, homes have continued to appreciate when you look at Canada even from an immigration perspective, over a three year period 500,000 new immigrants are coming to Canada that need a place to live. And you know that, you know, supply and demand with kind of, shall I say right now a buyers market barely. Because, I mean, there's a little more inventory, but there's still not a lot compared to historical norms.
Pattie Lovett-Reid
So I do think that there are great opportunities here to think about, okay, if I want to stay in place, and yes, maybe it's going to cost me a little more, once you start to see rates come down a little, this is a product that you're going to start to see go higher. But I can tell you people are reaching out right now, because you can't time the interest rate market. And people need some financial flexibility today.
Sean Cooper
Oh, those are all great points, Pattie. And also, maybe you can talk about the importance of looking after yourself first and foremost, because I know many older Canadians, they wanted to do everything, they would literally give the shirt off their back or their adult children. But it's very important to look after yourself, because you don't want to kind of give away everything and then not be able to afford to live for yourself there. So I guess that's kind of the apprehension around the reverse mortgage, because they want to give money to their children when they eventually pass away.
Sean Cooper
But it's important to be able to look after yourself while you're still living. Because like I said, People are living longer and longer. I mean, somebody without children. I mean, they don't really have that concern there because they're not planning to give away their property. But maybe you can speak to that point there. Because I've heard stories of people who literally get themselves in a lot of debt, they give their adult children money, and they're boring it and then they find themselves in a kind of a tight financial situation there.
Pattie Lovett-Reid
Yeah, you know what, it's emotional. There's no question about it. And it could be difficult. You know, I think it works both ways. Adult children will know if their family is struggling. And they probably have a pretty good idea of what their financial situation is without necessarily knowing the details. And in some cases, it's about giving the adult child permission to use their money as they see fit, so that the parent can feel a little better about the situation. But I can tell you having the difficult financial conversations, having the talk with your parents, it isn't easy.
Pattie Lovett-Reid
My parents many years ago made it clear to me that I should not expect any financial gifts from them. But they also promised me not to ever be a financial burden to anyone. I have two brothers and a sister in law at the time, I kind of thought, Hmm, I'm not going to get any sort of windfall, and they kind of laughed with them. But I realized now as years have passed, not all families are as lucky as mine was. And so I do think, to the extent that you are comfortable having the conversation, you need to understand where your parents stand not to criticize their cash flow, but to try to comprehend it, review their portfolio appropriate in terms of understanding where all of their money's coming from to help them fund their retirement.
Pattie Lovett-Reid
I don't think adult children necessarily should be very quick to cosign on a debt instrument. It works both ways. Neither one wants to rack up debt because of someone else. But if finances allow it, I have seen many decide to buy their parents home. You own the asset, they have lifetime accessibility. They've given their parents permission to explore the reverse mortgage, seeking out professional help. You know, Sean, any way you look at it, this is very, very touchy, it's delicate. Proceeding with caution is about mutual respect. But it's about having an open and honest and transparent conversation.
Pattie Lovett-Reid
If you decide to, and if you don't, and you're the one exploring the reverse mortgage, that's okay, too. This is your financial life. Shawn, I'm going to share with you one of the best pieces of advice I've ever received.
Sean Cooper
Wow, I feel honored.
Pattie Lovett-Reid
Thank you. You know what it was at my mother in law's funeral? And I was in my early 40s. And a colleague came up and said, Are you open to some advice, Patti? And I said, Sure. And she said, your golden years are right now and I thought, Oh my! How old does she think I am? And when I kind of laughed about it. She said no, no, no, this has nothing to do with age, this has everything to do that not a single one of us really knows with absolute certainty, just how long we have.
And so embrace life. I know that this economic environment isn't easy for a lot of people. But that doesn't mean you can't still say this is I've made it this is the year of yes, for me. Yes to new challenges, yes to new opportunities, yes to new experiences. It doesn't mean I do it all at the same time, but your golden years, regardless of your age, or right now. So don't let the economy affect other family members, whatever it may compromise the life you get to live today.
Sean Cooper
Wow, that's amazing advice. I wish I heard advice like that several years ago, maybe I would have lived my life differently. But at least the listeners have the benefit of hearing it today. And hopefully they can be inspired from it like you were so thank you so much for sharing that personal story with us. We really appreciate it. And yes, I just wanted to touch on a couple last things before we wrap things up here. So maybe you can speak about the importance of looking at your options early on, rather than waiting until you've retired already.
Sean Cooper
Because you mentioned good potential options. And again, you want to sit down with an experienced professional, like independent mortgage brokers to evaluate these things for you. But the challenge that I see working with people these days is that if you wait until you've already retired, you're really limiting your options, because in order to, for example, qualify for a home equity line of credit, or like pulling out equity of your property or whatnot, you need to have some decent income on paper there. So yeah, yes. So you could talk about the importance of looking at that early on, rather than waiting until 67, or something like that, when you're retired and you have limited income. I think that's an important point.
Pattie Lovett-Reid
You know, what it is, and from what I've gathered from talking with people, is they start to think about retirement about a decade before they actually retire. And something to keep in mind. That's only if it's according to their timeline, not necessarily their employer's timeline. Because I've seen it all too often, where really good people find themselves part of an organization's restructuring. And maybe financially, they're ill prepared for that they may not have the emergency fund, they may not have the financial flexibility, they may be at an age as well, where it's difficult to find another job in the same field at the same level, depending on what it is.
Pattie Lovett-Reid
So I do think that it is important. And it's incumbent on all of us to actually have some financial planning flexibility. And what I mean by that, my husband and I, we've been married 29 years coming up to 30.
Sean Cooper
Wow, that's amazing.
Pattie Lovett-Reid
Yeah, it's great. And it's a great, great life. But from our very first Christmas together between Christmas and New Year's, we've done a net worth statement. And I get it a net worth statement is a snapshot at a point in time. But what it does is when I list down or we together, list down our assets, and at the time, our liabilities. What it did is it allowed us to develop a plan for the next year, it acted as a roadmap for us, I can tell you, not a single financial plan that we put in place in January came through to fruition in December, because there are going to be financial detours, there are going to be speed bumps, there are going to be things that could happen.
Pattie Lovett-Reid
And these financial plans that people have, they're not carved in stone. But what I like about having the plan and to your point early enough, is that it allows you to take corrective action when life gets thrown off course. So I think regardless of your financial situation, every single one of us, even if it's a back of the envelope calculation, does deserve to have a financial plan.
Sean Cooper
Agree completely. I do that myself. But I'm glad I'm not the only one who tracks my net worth like that there. But yes, plan. But yes, this is definitely a good idea to just see where you're going because it's hard to track your progress. If you're not, it's hard to kind of see the big picture and see how you're doing towards your ultimate goal of early retirement or whatnot if you're not tracking your progress and seeing how you're doing so that's definitely some braided advice there.
Sean Cooper
And yes, just the last topic, and we touched on it earlier, but maybe we could just talk about it a bit more the whole downsizing thing because what I heard was like several years back all the financial experts were saying oh, the baby boomers are gonna to downsize and get rid of their oversized houses and move to condos, or move to the countryside or something like that, but that just doesn't seem to be happening. So maybe you can talk about, like, the reason behind that, and also how it's affecting the current real estate market and affecting, like, first time homebuyers and like multi generational houses and how people are making it work. Because yes, it doesn't seem like things have gone according to plan.
Pattie Lovett-Reid
No, it doesn't feel like they've gone according to plan, there's no question especially in urban centers, a COVID also brought a lot to the forefront in terms of how people wanted to live, where they wanted to retire, and more and more that's at home where they're comfortable. So we definitely have seen that we have seen, in some cases, an exodus out of urban centers into rural centers, that of course, when you get supply and demand that will push prices higher. And I think the landscape has just shifted to realizing that real estate was the one area that propped up this economy during COVID, and it kept us going.
Pattie Lovett-Reid
Because it's not just simply the low interest rate environment that allows people to get into homes. But it was also the knock on effect, everything that comes with the home, that makes it the money pit that we all know that it is. But you do spend a lot of money and that in turn, helps the economy. I am in the camp that the Bank of Canada did the right thing to stimulate the economy to keep things going, and to support the relocation that so many people desired at that point in time. And so now as we sort of figure out where we go from here, I do see many organizations calling people back into work, I do see a shift happening, but it's not going to happen overnight.
Pattie Lovett-Reid
And I guess one of the wildcard Sean, that I think we'll all be watching is the next interest rate announcement isn't until December 6, by the Bank of Canada, and between now and then we'll get a read on inflation, third quarter GDP will see a job report and the market volatility will likely continue. And if in fact, we see a meaningful movement in inflation, which no one really expects to see at the core level. But the next move by the Bank of Canada, after we get through this slowdown, recession, technical recession, whatever you want to call it, it could be a drop of 250 to 300 basis points. Because the Bank of Canada when raising rates, it's like climbing up a ladder. It's step by step by step by step, and we've all witnessed it. But when they cut to stimulate the economy, it'll be like coming down in an elevator. And so that too, will help out the housing market. But we're still dealing with a lot of demand and not a lot of supply.
Sean Cooper
Yes, so definitely hang in there a bit longer. Definitely, we've seen some positive news like with the US CPI number coming in at 3.2%. And looks like Canada's numbers are going to be around that there. So once we fall within that band of one to 3% and closer to the 2% target, definitely, that's when the Bank of Canada will start considering cutting interest rates. So just hang in there. If you're having trouble handling things, just know that help is on the way. And it's just going to be a few more months till rates hopefully, fall sometime next year most likely, it's looking like.
Pattie Lovett-Reid
Yeah, I think I mean, many are saying there's a push pull here, Shawn, do we see the Bank of Canada pull back on interest rates for the spring, and that ignites the spring housing market, which then pushes inflation higher, and inflation likely at the core level is not going to drop meaningfully closer to 2% will probably still be three and change call it or do they pause? Many investors are starting to believe that or do they have another interest rate hike in them? Depending on the data? Many economists on Bay Street had said the bank rates at 5%. Could it go to five and a quarter? Will it hit 5.5? You know, we've been fooled before.
Sean Cooper
Yes. So definitely tune into the latest numbers there and add latest inflation numbers and growth numbers as well because that would really be an indication about what the Bank of Canada might plan to be doing in the coming months here. You got it. Okay, perfect. Well, thanks so much for your insight today Pattie, it was great to finally return the favor and have you on my podcast here and really appreciate your time here. And thanks so much for sharing your personal stories with the listeners and really enjoyed speaking with you. So thanks very much for your time today.
Pattie Lovett-Reid
Thought it was so much fun. I feel like we've come full circle. So thank you so much for having me on.
Sean Cooper
Thanks for listening to another episode of the burn your mortgage podcast. Besides being a podcast host, I'm also an independent mortgage broker. If you or anyone you know, family, friends, co workers or neighbors could ever use any unbiased mortgage advice, or a second opinion, feel free to reach out, email me at Sean that's sean@burnyourmortgage.ca or call or text me at 647-867-3711 for a free mortgage consultation. Also, be sure to head on over to www.burnyourmortgage.ca and sign up for my free weekly newsletter. As a small token of my appreciation, you'll be able to download my ultimate mortgage checklist on choosing the perfect mortgage. I look forward to hearing from you and helping you with all your mortgage needs. Once again, thanks for listening.