Let’s face the facts. Canada’s Seniors who own houses bought them many years ago for under 100 thousand dollars. I know that sound crazy in today’s markets. After all there are bidding wars all across the country with people or FMO’s willing to pay thousands over the asking price. So will Canada’s housing bubble make Seniors millionaires. It sure looks like this is the case as the average house across Canada is soaring in price. The sad thing about this situation is that a lot of seniors are living on a fixed income. With bond yields paying low interest and inflation rising the question beckons how are these seniors going to pay the bills.
Many seniors are not so lucky as to own real estate. Poverty among the elderly is growing as house prices rise and rent becomes a choice between food or being homeless. It seems we are moving into two categories that will separate the retired population in Canada. You can either keep working until you pass away or you can tap into the millions of dollars your house is now worth.
The New Senior Millionaires
Now that your house is worth millions but your pensions aren’t feeding the Cat it is time to take a look into how to tap into that cash. Maybe you want to help the kids get into the housing market. How about that dream vacation to the Bahamas. There are many reasons why. Three ways house-rich, cash-poor retirees can tap into the value of their homes. Property values have risen steadily across Canada in recent decades, giving retirees who own their homes some extra financial cushion for their golden years.
Retirees who don’t have enough savings in their registered retirement savings can 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. Sounds good in theory but house equity loans can cost a small fortune in fees and interest. And don’t forget you gotta pay it back which will increase your monthly expenses. So what about a reverse mortgage?
Reverse mortgages basically take how much equity you got in your home cut it in half and write you a check. And guess what? No monthly fees to pay. Does this sound appealing? It would give seniors with ton’s of equity in their homes a way to pay for the rising cost of day to day living expenses. For FREE. Let’s face it you made all that money on your home from inflation. And inflation is rising as we speak. It is every where and it is not going away any time soon. This and the cost of supplies to build your home, including labor are pointing to only one conclusion. House prices are only going to grow more over the coming years.
Tap into that growing Wealth
I know there are many seniors out there who don’t own real estate. These are the ones who are in trouble. Unless the government steps in to build housing for them the future looks grim. But this Article is about the cash poor seniors that do own real estate. A reverse mortgage may sound a little frightening because you want to leave something to the kids, correct? Well with inflation about to rear it’s ugly head the 100,000 or 200,000 you get today will be worth a tiny percentage of what your house will be worth in ten years from now. Why is this?
Governments around the world, at least in Capitalist society’s cannot raise interest rates or the system will implode. They must print more money! That is the only way. Sure one day the whole deck of cards will come tumbling down but no one knows when! Believe me, they are just going to keep printing and printing which means your house could easily double again in ten years. Tap into this Ocean of cash. Get yourself a couple hundred thousand dollars and don’t make any payments until you die, or sell your house. The great thing is you will never have to sell your house. Once you do have to move on the loan amount owing get’s paid.
Let’s say you borrowed 200000 and they charged you 5% interest. That’s 10000 a year on top of the 200000 you will pay back. With inflation your house will easily double in ten years. This will leave you with 700000 more equity on top of the equity you left in it when you got the reverse mortgage. This will be plenty of cash left for the care home and the kids too. If anything there will be a lot more care home being built in the coming decade. These care homes are going to be nice also as the boomers in the millions aging will require it. After all they have all the cash.
Future of a Reverse Mortgage
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. That is 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. Also they can have penalties for early repayment. You must keep the house in good shape and taxes, etc up to date.
Still, it’s a good option for some retirees, including those who don’t qualify for a HELOC. It’s a great way to allow you to stay in your home.
While the interest rate is higher than a more traditional loan 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. The interest you pay is only on the amount you borrow, which is up to the individual homeowner.
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. interest rates are expected to get more competitive in the future as more lenders enter the market.
Home Equity Bank dominates the small reverse mortgage market in Canada through its CHIP Reverse Mortgage product. Equitable Bank is newer to the category. As more and more Investors enter the home mortgage reversal business you can bet your boots competition will be fierce. Expect better deals and lower interest rates which will really take the reverse mortgage a great retirement vehicle.