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How can a reverse mortgage help you or your children.

April 18, 2023

A Reverse Mortgage is a way for homeowners 55 or older to turn a percentage of the value of their home into tax-free cash.

It’s a loan secured against the value of the home, but unlike a traditional home equity line of credit or a conventional mortgage it does not require monthly mortgage payments for as long as you live in your home.

 You always maintain ownership and control of your home.  A reverse mortgage will not affect any government benefits you may receive, such as Old Age Security (OAS), Canada Pension Plan (CPP), or Guaranteed Income Supplement (GIS).

You’ve worked hard to own your home.  Now get your home working for you:

  • Pay off Debts
  • Renovate or make your home more accessible
  • Help your children with a down payment
  • Handle unexpected expenses
  • Improve your day-to-day standard of living
  • Make a special trip or purchase

Saving up an adequate down payment is among the hardest obstacles for young homebuyers – and more difficult now then ever before because of rising home prices.  An increasing amount of Canadians 55+ are gifting their children money for a down payment.  In fact, according to a report from CIBC, 30% of Canadians received financial help from their families to purchase a home in 2020.  This is significantly higher than the 7% of Canadians in 2000. 

I have seen this trend of late with parents who live in a house with a lot of equity.  They want to see their children benefit from their inheritance while they are still around.

As an example, I have a client we will call Kate.  Kate has two children who are in entry level homes.  Kate took a reverse mortgage for $643,500.00 against the value of her home appraised at $2,000,000.  She paid off her small mortgage of $243,500.00 and gifted each child $200,000.00 to upgrade their homes.  Both children bought newer, better homes with suites.  The plan is Kate will sell in a few years and then live with each of her children for 6 months of the year.

The illustration attached shows that, even with a conservative 3% appreciation in the housing market, the parents will still have more equity in their home 10 years from now than they have today.

A Reverse Mortgage is a great way to access the equity in your home.  Call me for more information.

Reverse Mortgage Financial Illustration (7)

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