A Reverse Mortgage can be a boon for ‘House Rich, Cash Poor’ homeowners. Many retirees are finding that their pension incomes are not keeping pace with spiralling inflation. A great opportunity exists for financial advisors to assist clients looking to optimize investment portfolios through a Reverse Mortgage.
As real estate values soar at an extraordinary pace, Reverse mortgages are a viable financial product that Financial Advisors might want to consider. Many retirees are in a ‘House-rich, cash-poor’ situation and are often faced with the dilemma of possibly having to sell their homes prematurely to make ends meet. For house-rich Canadians facing liquidity challenges in retirement, the idea of unlocking an alternative income stream using their home equity may hold great appeal, especially amid red-hot housing markets.
A housing price run-up spurred on by low interest rates and the desire for more space among many Canadians means homeowners have a burgeoning pile of equity to draw from.
The Reverse Mortgage may be something of a conundrum, so the following will help clarify:
What is a Reverse Mortgage and how does it work?
A reverse mortgage is a tool available to Canadians aged 55+ to provide financial flexibility in retirement. It allows access of up to 55% of the home’s value in cash, tax-free. One of the primary benefits of a reverse mortgage is that there are no regular principal or interest payments required. Interest is added to the balance, and you only need to pay the balance when you cease to occupy the home. The proceeds are tax free.
Some retirees might be faced with the prospect of having to leave their home of many decades because of cash flow issues; for those people, a reverse mortgage might mean the difference between staying and moving out. To determine the different solutions that may be available to them, it is vital that they discuss these options with a qualified financial advisor.
As a case in point, I recently concluded a Reverse Mortgage with a client in Clarington, age 83, who had been left in a precarious financial position due to the recent death of her husband with the resultant loss of pension income. She had also accumulated considerable Credit Card and Line of Credit debt that was difficult to sustain. She did not wish to move, but as she would not have enough income to continue living in the property, this was an eventuality that she would soon be facing.
A Reverse Mortgage was the solution to her dilemma. With a property value of more than $1.3 million, she was qualified to receive $600,000 as a Reverse Mortgage. Thanks to the help of her Financial Advisor, she will now have an investment income that will handily supplement existing pensions and allow her to stay in the house that she and her late husband have owned for more than half a century.
In regard to the above, I would like to thank Mike Kelly of Q&L Financial Services in Bowmanville for his invaluable input and his expertise in optimizing the proceeds from the Reverse Mortgage, now ensuring that this lady will not be forced to sell her home and move.
The Reverse Mortgage could be an invaluable source of funding for your older clients (55+ years of age) and present a largely untapped market for Financial Advisors.
If you have clients in this age bracket and would like to offer them a way to free up cash reserves, a Reverse Mortgage would be a very viable option.
A reverse mortgage is a tool available to Canadian seniors to provide financial flexibility in retirement. It allows you to access up to 55% of your home’s value in cash, tax-free.
One of the primary benefits of a reverse mortgage is that there are no regular principal or interest payments required. Interest is added to the balance, and you only need to pay the balance when you cease to occupy the home. The proceeds normally won’t impact the government retirement benefits you’re receiving, and the proceeds are tax free.
Do you have any questions with regard to Reverse Mortgages?
Why not give Terry Lynch a call to discuss these or any other issues in greater detail.
Terry Lynch is a licenced mortgage agent with TMG, The Mortgage Group. In addition to Reverse Mortgages, Terry also specializes in: conventional mortgage funding, lines of credit, commercial and construction loans, Challenged Credit. He also secures funding for a variety of businesses such as retail, restaurants, franchises etc.