Reverse Mortgages: Getting money out of your home in retirement
aliko-aapayrollservices.com - Small businessess from 1 to 80 employees outsource your payroll management to us and let us worry about your payroll processing.
RSS Follow Become a Fan

Delivered by FeedBurner


Recent Posts

Tax changes to expect when you’re expecting
2016 Tax Tips for 2015 Filing Year
From Proprietorship to Corporation - When is the Best Time to Incorporate?
Tax Specialists Brief your Clients About CRA Fraud And E-Mail Scams
Bank of Canada cuts rates again

Most Popular Posts

Help your teenager build credit responsibly
Being an Executor of an Estate
Anti-Aging
Student Line of Credit
Principal Residence Exemption

Categories

aliko nutrition store- isotonix
aliko payroll services
canada revenue news and videos
canadian news
CPP ,OAS RRIF ANNUITY
Cross border Tax
Disability awareness and Benefits for disabled
estate planning
FINANCIAL LITERACY
HEALTH & NUTRITION
Home Car Insurance
Income Splitting Strategies in Retirement
INVESTING
kids and money -set your children up for financial success
life insurance
on line safety tips
online safety tips
PAYROLL
Real Estate - Investments / Retirement
RETIRE HAPPY BLOG
Retirement planning
SAVE YOUR MONEY
Save your money
SERVICE CANADA NEWS
small business planning
Tax Information for Students
tax news
tax planning
tax tips.ca
Tech news
TFSA

Archives

January 2016
July 2015
May 2015
April 2015
February 2015
December 2014
November 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013

powered by

MY BLOG

Reverse Mortgages: Getting money out of your home in retirement

Reverse Mortgages: Getting money out of your home in retirement
 
 
 
 
Reverse Mortgages: Getting money out of your home in retirement
 
 
 
 
Written by Jim Yih
When people think about getting money out of their paid off homes in retirement, reverse mortgages are usually the first thought that comes to mind.
A reverse mortgage is simply a loan that is secured by the equity you have in your home. It is designed for retirees who want to access some of the equity in their home to supplement their retirement lifestyle.
Essentially, a reverse mortgage lender gives you a lump sum of money based on an appraisal of your home. The amount of loan will likely be 25% to 40% of the value of your home depending on a number of different factors like your age, the appraised value of your home, and the location of your home (is it in a big city or rural?).
Instead of making payments on that loan, the interest costs simply accrue and grow. The reverse mortgage lender assumes that the value of the house will also grow in value, which ensure there is always equity in the home. The loan eventually gets paid off when you die or when you sell the home.
Having seen a few quotes, I think retirees need to tread carefully when it comes to reverse mortgages. Sure it’s appealing that you do not have to make payments but the costs in terms of fees and interest should make you think twice.
Line of credit
One alternative to a reverse mortgage is to use a home equity line of credit (HELOC) to achieve the same thing. With a line of credit, you can access up to 75% of the value of your home but the big difference is you will have to make payments of at least the interest. You will only have to make payment but only on the amount borrowed.
With a line of credit, you will have so much more flexibility in terms of how you use the line of credit, when you use the money, and how much money you can access. You are also likely to pay less fees and get a lower rate of interest on the loan.
The problem is it requires a little more management and involvement than the reverse mortgage. I would draw some parallels to the RRIF and annuity options as retirement options for the RRSP.
When it comes time to retire and convert your RRSPs to income, you can choose between a RRIF or an annuity. The annuity is kind of like the reverse mortgage from the perspective that it requires very little management and decision making. The RRIF is like the Line of Credit in that you have maximum flexibility and more control over your money and assets.
In the end, I think the numbers will give you the best option. If you are looking to get equity out of your home in retirement, get a reverse mortgage quote and compare it to the option of a line of credit.
When it comes to RRIFs and annuities I would estimate that 95% of retirees choose the RRIF over the annuity. When you look at the reverse mortgage versus the line of credit, I think the numbers will likely lead more people to the line of credit. That being said, the reverse mortgage still has it’s place just likne the annuity will always have it’s place.
 
 
 
 
 

0 Comments to Reverse Mortgages: Getting money out of your home in retirement :

Comments RSS

Add a Comment

Your Name:
Email Address: (Required)
Website:
Comment:
Make your text bigger, bold, italic and more with HTML tags. We'll show you how.
Post Comment