As we move forward through these challenging times, we are learning more and more the financial impact that is being felt by many homeowners of all ages across Canada. Last month, I discussed the different options that homeowners could explore if they were feeling financial strain. This month, I would like to focus specifically on those folks who are retired, and who are looking for additional assistance whether it is to help themselves or perhaps provide financial support to their loved ones.
Given the volatility of the financial markets, this may not be the ideal time to liquidate investments or sell off assets in order to make ends meet. Perhaps your existing income does not allow you to qualify for traditional financing, especially with lenders tightening their lending policies. So, what other options exist?
With a reverse mortgage, homeowners that are at least 55 years of age can free up to a maximum of 55% equity in their home and allow them to enjoy retirement on their terms. Whether you are using the money to supplement your existing cashflow, pay off debt, take a dream vacation or helping grandchildren with school tuition, a reverse mortgage can provide the necessary funding for virtually any purpose.
In fact, many financial professionals and planners recommend a reverse mortgage as the proceeds are tax-free, and as such, these funds do not have any impact on CPP, OAS or income tax brackets. This can also help you preserve your retirement savings during economic down turns or allow your portfolio to continue to grow.
Perhaps one of biggest advantages a reverse mortgage has over a traditional mortgage is that no regular payments are required. Regardless of how long you hold a reverse mortgage, no payments are required until you sell the property. This in and of itself can improve monthly cashflow and reduce unnecessary financial stress.
There are a number of misconceptions that have been formed over the years about reverse mortgages. Like anything, full transparency is critical when it comes to making solid decisions. Information about reverse or regular mortgages is no different. A reverse mortgage may or may not be the best solution. It all depends on your personal situation, as well as current and future goals.
As always, I welcome any questions or inquiries you may have about the contents of this article or mortgage financing in general. Until next month…
Jason Eldridge B.Admin, PFP
Axiom Mortgage Solutions