(NC) For many Canadian homeowners, their house represents the biggest portion of their net worth. Now, increasing numbers of seniors are starting to recognize the hidden value of their homes.
The amount saved by baby boomers, as well as their ever lengthening retirement prospects make finding additional sources of income more necessary than ever. Did you know that as many as 50 per cent of all seniors surveyed (by the Investor Education Fund) said they believe their retirement savings will be exhausted within 10 years of leaving the workplace?
Their concern is well justified as, according to a 2012 Leger Marketing study, 58 per cent of Canadians in their 50s say they have less than $200,000 saved for retirement. Other surveys show that as many as 59 per cent of retirees owe money to a lender, up from only 40 per cent just two years ago.
So modest savings combined with the increasing costs of servicing debt is making it imperative for seniors to look for ways to enhance their cash flow.
“The solution for remaining financially independent doesn't have to be as drastic as downsizing, selling the house, delaying your retirement, or going back to work,” says Arthur Krzycki, a director with the HomEquity Bank. “If you own a home it should remain your security for the long haul and there are a couple of sound ways to let your house pay back while you live in it.”
Empty-nesters, says Krzycki, might want to become landlords, a viable solution especially if you live in a prime location and have a separate entrance to available rooms, or to a basement that can be turned into a self-contained apartment.
“Or, if you're not comfortable with strangers in your home,” he continues, “why not access some of the equity with a reverse mortgage? Based on the value of your house, this option gives you a reliable cash flow to supplement your income.”
Here's how a reverse mortgage like a CHIP Home Income Plan could work for you:
• If you have reached age 55, you may be eligible for the CHIP Home Income Plan. It lets you convert up to 50 per cent of the equity in your home into tax-free cash.
• Unlike other loans on the market, there are no credit or income qualifications and you are not required to service the interest, or repay the principal until you choose to move or sell.
• It is also guaranteed that you will never have to repay more than the fair market value of the house at the time of the sale.
“While it almost seems too good to be true, CHIP's increasing popularity is easy to understand as soon as you talk to our clients,” Krzycki explains. “As many as 78 per cent tell us they would recommend this kind of reverse mortgage to others as a good source of extra cash in retirement.” Financial advisors and mortgage brokers have details and additional information is also available online at www.chip.ca.