Most seniors who own homes have stopped working and are either relying on passive income through investments or their savings. A lot are cash poor and feel that they can’t enjoy retirement because of financial issues. Luckily for them, they can use the accumulated value of their property to their advantage!
What is Home Equity and What Does It Mean for You?
Home equity is the value of the property that is paid for and owned by the homeowner. This value often grows bigger as real estate prices increase in the area and can be used to help the homeowner through financial difficulties.
Home equity can also be defined as the difference between the home’s market value and the percentage or part of the value that the homeowner still owes. Say your home’s market value is $400,000 and you still owe $35,000, then your home equity is $365,000!
A substantial home equity is a great advantage for the homeowner. Although it cannot be sold, it can be used as security when applying for a home equity loan (also known as a reverse mortgage).
A senior Canadian citizen often will have no issues tapping into home equity by applying for a home equity loan. The value of the loan will depend on several factors including the value of existing equity, the real estate climate in the area, location of the property, prior debts, type of home, and the age of the homeowner and spouse.
Use Your Home Equity with A Reverse Mortgage
With a home equity loan aka a reverse mortgage, you can choose to receive funds over a period of time as a sort of income or take the amount as a lump sum. You will continue to own your home as long as property insurance and taxes are paid and that you keep the property well maintained.
Another good thing with a home equity loan is that no regular payments are required because the loan won’t be due until the homeowners move out or when the home is sold. Note though that any interest will be added to the original amount owed. The equity that remains after that amount is paid still belongs to the homeowners or their estate.
Your home equity loan funds can be used for:
- Funding for a hobby or travel
- Paying off debts
- Funding necessary home improvements such as moving the master suite downstairs when your needs change
- Covering unexpected expenses such as emergency medical bills
- Paying for higher education for your children or grandchildren (or yourself!)
Apply for a Home Equity Loan!
If you are a Canadian home owner who needs extra funds to maintain your lifestyle or to finance something important, a home equity loan can surely work for you. No issues as well even if you are over the age of 55!
Are you interested in discussing the ways you can use your home equity as a senior with Canadian mortgage professionals? Contact us at Homebase Mortgages and we will make sure that you fully understand the benefits before committing to anything.