Help­ing You Help Your Fam­ily

94% of clients rec­om­mend a CHIP Re­verse Mort­gage

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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.

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