Helping You Help Your Family
94% of clients recommend a CHIP Reverse Mortgage
THERE ARE VARIOUS REASONS WHY A homeowner might consider a reverse mortgage. Perhaps your home needs a few updates or a main-floor renovation that will allow you to age in place. Maybe you’re looking for extra cash to keep up with rising monthly bills, or you want to pay off a high-interest debt. Perhaps you want to fund that dream vacation or cottage so you can start enjoying your retirement.
If you’re over the age of 55 and have built some equity in your home, a reverse mortgage is an option that will allow you to turn that equity into cash – without giving up ownership of your home. The maximum equity you may be able to use is 55%, which is why almost all clients (99%) have cash left when the home is eventually sold and the loan repaid. Studies show that the vast majority of us prefer to age in place, rather than downsize and live somewhere else. A reverse mortgage lets you do exactly that, while increasing your monthly cash flow.
THE EMPTY NEST IS NOT SO EMPTY There’s another increasingly common reason why many Canadians are cashing in on part of their home equity: to help their kids. About one in five Canadians in the 55-plus age group has a child – or, in some cases, multiple children – who is financially dependent on them. This is often referred to lightheartedly as the “Bank of Mom and Dad,” but the truth is, these funds aren’t unlimited. It can put pressure on an already-tight budget. And yet, as parents, we want to support our families. A reverse mortgage is a way to unlock the value of your home and provide your kids with an early inheritance, long before you sell or pass away.
Here are five facts that explain why more Canadian parents are turning to a reverse mortgage to help support their adult children.
1 The next generation is often struggling financially.
A study at the University of Waterloo concluded that millennial earners are, on average, taking home less income than their parents did at their age. They also have less employment security, while costs like post-secondary education and housing have skyrocketed. In an HSBC global report on home-buying, 42% of Canadian millennials who’d recently made a housing purchase ended up spending more than they’d budgeted for.
2 Canadian parents want to give their children a good start.
A recently released CIBC poll found that three-quarters of Canadians with a child 18 or over would like to help them financially so they can afford to live on their own or get married. In the HSBC report, 37% of millennials who already own a home say their parents helped with the purchase. (One in five were repeat customers at the Bank of Mom and Dad – they asked for more money after new expenses cropped up!)
3 Cash from a reverse mortgage is tax-free – for you and your kids.
Income you receive from a reverse mortgage is not taxable (and won’t affect your old-age benefits). Likewise, your adult children don’t pay taxes on any money gifts you make to them.
4 It can help you hold onto a more spacious home.
According to Statistics Canada, young adults are living with parents longer. Some are still in school, while others are “boomerang” kids who move back in, sometimes bringing their own children. A reverse mortgage can help you keep a house with space for your kids to live. You can afford to pay for maintenance, and even turn your basement into extra living space.
5 It’s better than putting yourself into deep debt.
One in seven parents in the CIBC poll said they actually plan to borrow money in order to give their child a financial gift. Compared to a typical high-interest loan, a reverse mortgage has several advantages. It requires no monthly payments, it’s less risky and it carries a more competitive interest rate. You can even charge interest to your children at the same low rate.
We love our families. We also love our homes. A reverse mortgage can provide you with an increased cash flow, reduce the risk of losing a cherished home – and help you help your family, all at the same time.