- Three ways house-rich, cash-poor retirees can tap into the value of their homes
- Consider giving your Children an Early Inheritance
- BNN Interview Amanda Lang with Home Equity Bank's CEO Steve Ranson
- Discover How Your Home Can Help You Live a Better Retirement
- Want to enjoy a Financially Stress-Free Retirement? We can help!
- Common uses of a Reverse Mortgage
- Chip Reverse Mortgage; Myth vs. Facts
- A CHIP Reverse Mortgage. You won't owe more than your house is worth!
- What you can do with a Reverse Mortgage
- Stay in your home. Maintain ownership. Use the money however you need.
Three ways house-rich, cash-poor retirees can tap into the value of their homes
A home-equity line of credit is one of the most common ways retirees can generate income from the value of their homes, but the immediate access to funds could inspire some to withdraw more than they need.
Property values have risen steadily across Canada in recent decades, giving retirees who own their homes some extra financial cushion for their golden years.
“It’s not uncommon for people to have most of their assets – well over 50 per cent of their net worth – tied up in their home,” says Jamie Golombek, managing director, tax and estate planning, at Canadian Imperial Bank of Commerce in Toronto.
“There’s nothing wrong with that,” Mr. Golombek adds, but he notes that retirees who don’t have enough savings in their registered retirement savings plans, tax-free savings accounts or non-registered investments may need to tap the value of their homes to fund their lifestyle, or cover large expenses such as a new roof, a new car, or health-care costs if they become seriously ill.
For these retirees, the options include borrowing against their property, either through a home-equity line of credit or a reverse mortgage, or to sell the home and buy a cheaper one or rent.
Here is a closer look at the pros and cons of each option for retirees who are house-rich, but cash-poor:
HOME-EQUITY LINE OF CREDIT
(HELOC) A HELOC is one of the most common ways retirees can generate income from the value of their home to cover expenses, owing to its flexibility and relatively low interest rate. A HELOC is a revolving credit, which means the money can be borrowed, then paid back, then borrowed again.
“The easiest thing you can do … is to get a [home equity] line of credit,” Mr. Golombek says. Of course, borrowers have to qualify for a HELOC, which is why he recommends people get a maximum line of credit even before they need it, such as when they buy the home, have paid down the mortgage, and while they’re working and have a source of income.
“You don’t have to use it. It’s just there,” he says.
Rona Birenbaum, a certified financial planner and founder of Toronto-based fee-for-service financial-planning firm Caring for Clients, believes a HELOC is a better way of funding a retiree’s financial needs because the rate is usually lower than a reverse mortgage and you only borrow what you need.
“It means you’re only paying interest on the amount you’re using,” she says.
A downside to having a HELOC is the immediate access to the funds, which could inspire some to withdraw more than they need.
“It’s not for people who lack self-discipline, whereby they might set it up to get the roof done, then they start spending willy nilly,” Ms. Birenbaum says. “For them, having access to the money could be a danger.”
A reverse mortgage allows homeowners aged 55 or older to borrow against their primary residence without making payments against the loan until it comes due – usually when the owner moves, sells the home or dies.
Reverse mortgages draw criticism because they typically carry higher interest rates than conventional mortgages or lines of credit, and there are penalties for early repayment, as well as requirements to keep the house in good shape.
Still, it’s a good option for some retirees, including those who don’t qualify for a HELOC, says Warren MacKenzie, head of financial planning at Optimize Inc. in Toronto. “It’s a great way to allow you to stay in your home.”
While the interest rate is higher than a more traditional loan, Mr. MacKenzie says the home’s value will likely continue to appreciate over the long term, which is a benefit for the owner.
“You still have the inflationary protection and the interest you pay is only on the amount you borrow,” he says, which is up to the individual homeowner.
Ms. Birenbaum says an advantage of the reverse mortgage is the ability to access the equity in a home without regular payments.
“It’s the only kind of borrowing where you get the cash and you have no obligation to repay it, as long as you live in the house,” she says, but also cautions homeowners about the higher interest rate.
That said, Ms. Birenbaum expects reverse mortgage interest rates to get more competitive in the future as more lenders enter the market.
HomeEquity Bank dominates the small reverse mortgage market in Canada through its CHIP Reverse Mortgage product. Equitable Bank is newer to the category.
“I think the rates and product features are probably going to get better than they are today,” she says.
SELL AND DOWNSIZE – OR RENT
Selling the primary residence and downsizing to a smaller house or condo is a big trend with retirees today, Mr. Golombek says.
Retirees can use the tax-free profit and invest it to help fund their retirement needs and wants.
“If it’s something you want to do ... you have to get over the memories and the emotional part of it,” he says.
A more dramatic move may be to sell the primary residence and rent, which is also an emotional move for some, Ms. Birenbaum says.
“It could be more cost-effective than borrowing, but it means you have to leave your beloved home,” she says. “It’s not just that you’re not in your home that you’ve been in for years, but you may feel less rooted.”
The risk of losing the rental either to owners who plan to take over the space or if the property is up for redevelopment can be unnerving. “That kind of uncertainty is not helpful [for seniors],” Ms. Birenbaum says. “It’s definitely something you have to navigate and deal with,” if you decide to sell and rent.
At Homeguard Funding Ltd, we can assist with a CHIP Reverse Mortgage. Please email us at email@example.com or call 905-895-1777.
Why It's Worth considering an Early Inheritance
Have you ever considered helping your children financially? An increasing amount of baby boomers are gifting their children money for a down payment on their first home or simply gifting them money for other purposes. In fact, according to statistics from Mortgage Professionals Canad, gifts from parents for home purchases have doubled from 7% in 2000 to 15% between 2014 and 2016.
For those who choose to gift an early inheritance, their reasons are often as simple as being able to enjoy watching their children use the money to better their life, rather than wait till they pass.
An early inheritance avoids probate fees (estate administration tax), which can be as high as 1.7%, depending on your province. Gifting income-generating investments can also save you money by bringing you down to a lower tax bracket. Your tax specialist can tell you more.
An early inheritance can help your children:
- Make a down payment on their home
-Pay for their children's education
-Help them start up a business
-Pay for a wedding
How to do it
Many people use a home equity line of credit in order to gift an early inheritance. Others liquidate or transfer investments. However, these can bring disadvantages in the form of loss of earnings or tax payable when selling investments.
A reverse mortgage allows you to cash in your home's equity, without any of these disadvantages.
Advantages of Reverse Mortgages
-Your investments remain intact
-You have no regular monthly payments/fees
-Your income is not affected
The money you get from a reverse mortgage is tax free
Please give us a call to find out more about gifting an early inheritance to your children.
BNN Interview - Amanda Lang with Home Equity Bank's CEO Steve Ranson
This recent television interview on BNN is work a listen as this product is a growing option with the over 55 demographic. If you are interested in finding out more please contact us and we will be happy to answer your questions.
Discover How Your Home Can Help You Live a Better Retirement
Saving enough for your retirement in Canada can be a challenge. As the average life expectancy continues to rise, retirement savings are being stretched further over many more years.
Today, many Canadians just like you, are looking for ways to supplement their income as they enjoy their golden years. All too often, retirees are not fully aware of all their financial options and consider downsizing their home and leaving the community that they love in order to make ends meet.
Fortunately, there is a way you can acquire the money you need without having to move or sell your home. We would like to introduce you to the CHIP Reverse Mortgage. A CHIP Reverse Mortgage allows you to access up to 55% of the equity in your home as tax-free money. Not only are you are able to retain ownership, but there are no monthly payments for as long as you live in the home.
So whether you’re looking to alleviate debt, increase your monthly cash flow, help out family members, or even take that dream vacation – a CHIP Reverse Mortgage can be the option you’ve been looking for.
If you would like to learn more about how a CHIP Reverse Mortgage can benefit you, please contact us and we will be happy to answer any questions you may have and provide you with more information so you can make the right choice!
Want to enjoy a Financially Stress-Free Retirement? We can help!
Do you have the funds to live the retirement you’ve been dreaming of? If you’re like many Canadians, you may find yourself house rich but short on funds. The good news is that if you’re a homeowner who is 55+, there’s a solution to help you live the life you’ve always imagined.
Access up to 55% of your home’s value with the CHIP Reverse Mortgage from Homeguard Funding Ltd.
What exactly is a reverse mortgage? It’s a loan secured against the value of your home, while you continue to own and enjoy living in it.
Here are the great benefits of the CHIP Reverse Mortgage:
You retain 100% ownership of your home. The title and ownership of your home belong to you, not the bank.
The money you get is tax-free. It also doesn’t impact your Old Age Security or Guaranteed Income Supplement. Meanwhile, keep your investments growing without being taxed for withdrawing from your portfolio.
You decide how to spend the money you get.
You can use the net proceeds from your CHIP Reverse Mortgage to make home renos or retrofits, pay unexpected expenses, financially help children or grandchildren, purchase a second property, even take a dream vacation.
There are no regular mortgage payments required. Once you decide to leave your home, the interest and principal and any applicable charges are simply paid off from the proceeds of the home sale. You are still required to maintain your property taxes, fire insurance and condominium or maintenance fees.
No negative equity guarantee. You will never owe more than the fair market value of your home with the CHIP Reverse Mortgage.
With all of these advantages, it’s easy to see why thousands of Canadians 55+ have benefited from the CHIP Reverse Mortgage. You can too. Let’s talk about the retirement fund potential of your home. Give us a call to find out more!
The CHIP Reverse Mortgage is a unique financial tool that offers many benefits that no other product can. With the CHIP Reverse Mortgage, you are able to access up to 55%* of the equity in your home, tax-free. The money you receive can be used in a variety of different ways, including:
- Eliminating debt repayments
- Increasing your monthly cash flow
- Helping a child or grandchild
- Early inheritance
- Unexpected health care costs
- Home repairs and improvements
- A dream vacation
- And more!
By accessing the equity in your home, you are able to accommodate any financial obstacles and goals you have, without having to move or sell your home.
One question we often receive is: How does a reverse mortgage work? A reverse mortgage is a loan secured against the value of your home. However, unlike a traditional Home Equity Line of Credit (HELOC) or a second mortgage, you are not required to make monthly mortgage payments for as long as you live in your home. And, you will maintain ownership and control of your home.
If you would like to learn more about the CHIP Reverse Mortgage and how it can fit within your financial plan, please feel free to contact us at firstname.lastname@example.org.
Chip Reverse Mortgage; Myth vs Facts Reverse mortgages have come a long way. They have evolved from a needs-based product to a solution that many financial planners recommend as an important component of a comprehensive retirement plan. Unfortunately, there are still many misconceptions regarding reverse mortgages. Below, the myths are separated from the facts.
Myth: The bank owns the home.
Fact: You always maintain title ownership and control of your home, and you have the freedom to decide when and if you’d like to move or sell.
Myth: You will owe more than your home is worth.
Fact: Clients can qualify for up to 55% of the appraised value of the home, 33% on average. Due to Homeguard’s conservative lending practices, you can be confident that there will be equity left in the home when the loan is repaid. In fact, over 99% of Homeguard’s clients have equity remaining in the home when the loan is repaid.
Myth: A reverse mortgage is a solution of last resort.
Fact: Many financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it is tax-free money, it allows retirement savings to last longer.
Myth: You cannot get a reverse mortgage if you have an existing mortgage.
Fact: Many of Homeguard’s clients use a reverse mortgage to pay off their existing mortgage and other debts, freeing up cash flow for you to use as you wish. How great would it feel to be free of regular mortgage payments? You've paid into your home, now let your home pay you back to enjoy the years ahead!
Stay in your home. Maintain ownership. Use the money however you need.
These are only a few of the benefits a reverse mortgage can offer you. contact us to learn more about the other benefits and how this unique financial tool can benefit you.
The tax-free cash you can get from a reverse mortgage can be used for whatever you need it for. Whether it’s for eliminating debt, buying a vacation property, increasing your cash flow, or providing your family with an early inheritance – it’s up to you!
You can access up to 55% of the equity in your home and receive the money in a lump-sum payment, periodic installments, or a combination of the two. If you would like to learn more about how a reverse mortgage can be a tool in your financial plan, please contact us at 905-895-1777 or email@example.com
Wouldn’t it be nice if you had the money to do more of the things you want to do? A CHIP Reverse Mortgage could be just what you need. It’s the simple and sensible way to unlock the value in your home and turn it into cash to help you enjoy life on your terms.
BENEFITS OF A CHIP REVERSE MORTGAGE
You receive the money tax-free.
It is not added to your taxable income so it doesn’t affect Old Age Security (OAS) or Guaranteed Income Supplement (GIS) government benefits you may receive.
No regular mortgage payments are required while you or your spouse live in your home.
The full amount only becomes due when you and your spouse no longer live in the home
You maintain ownership and control of your home.
You will never be asked to move or sell to repay your CHIP Reverse Mortgage. All that’s required is that you maintain your property and stay up-to-date with property taxes, fire insurance and condominium or maintenance fees while you live there.
You keep all the equity remaining in your home.
In many years of experience, 99 out of 100 homeowners have money left over when their CHIP Reverse Mortgage is repaid. And on average, the amount left over is 50% of the value of the home when it is sold.
FREQUENTLY ASKED QUESTIONS
Who is it for?
The CHIP Reverse Mortgage is designed exclusively for homeowners age 55 and older. This age qualification applies to both you and your spouse.
How much can I get and how is it calculated?
You can receive up to 55% of the value of your home. The specific amount is based on your age and that of your spouse, the location and type of home you have, and your home’s current appraised value. You can contact me and I can quickly give you an estimate of how much you may be approved for.
Will the homeowner owe more than the house is worth?
The homeowner keeps all the equity remaining in the home. In our many years of experience, over 99% of homeowners have money left over when their loan is repaid. The equity remaining depends on the amount borrowed, the value of the home, and the amount of time that’s passed since the reverse mortgage was taken out.
What if the homeowner has an existing mortgage?
Many of our clients use a reverse mortgage to pay off their existing mortgage and debts.
What fees are associated with a reverse mortgage?
There are one time fees to arrange a reverse mortgage such as an appraisal fee, fee for independent legal advice as well as our fee for administration, title insurance, and registration. With the exception of the appraisal fee, these fees are paid for with the funding dollars.