Better Retirement Income Efficiency with Reverse Mortgages

How prepared are you for your retirement? If you want a comfortable retirement, chances are you’d be racking up your fixed costs which can lead to a higher probability of exposing yourself to sequence risks because you’ll surely be withdrawing more from your remaining assets. By withdrawing from a reverse mortgage instead of your remaining saved assets in the bank whenever the need strikes, you can mitigate some aspects of sequence risk – but only when you know what you’re doing.

Retirement Income Strategies

The best strategy you can use to manage your retirement income is to improve your spending efficiency. You should aim for being able to spend more while still being able to preserve a larger legacy and to do this, you’ll most probably need to know how to use your HECM line of credit. How so? The strategic use of an HECM LOC can help preserve your assets while allowing you to sustain a higher spending level (higher spending level = more comfortable life).

One of the strategies goes against conventional wisdom – that of preserving housing wealth until you pass away or only using it as a last resort. The strategy involves obtaining an HECM reverse mortgage when you’ve just retired and then carefully spending from the available credit. This is supposed to help you markedly improve your ability to sustain your retirement income strategies.

Using your home equity in a strategic manner can help you have a better life as seen from various researches conducted in recent years. Not only that, but the benefits of mitigating sequence risks far outweighs the compounding growth of the loan balance and upfront costs.

How true is this?

The research actually showed that the people who used the alternative strategy (use their home equity for reverse mortgage) actually ended up having a larger net worth as compared to those whose strategy is to go with conventional wisdom (saving the home for last). Yes, even with spending from their home equity, those who went for the reverse mortgage option did end up having a larger financial asset after 30 years of retirement.

Reverse Mortgage and Retirement

Before anything else, this article is not meant to encourage anyone to take a reverse mortgage. This is merely for informational purposes and to let retirees know that they have more options for a better life by being financially savvy. The research we mentioned was published in the Journal of Financial Planning’s February 2012 issue via the article “Reversing the Conventional Wisdom: Using Home Equity to Supplement Retirement Income.” In the article, the Sacks brothers (the two brilliant minds) further stated that they simply wanted the elderly to see their homes and their lives’ investments as something more and can be enjoyed if used properly.

Want to know more about how a reverse mortgage work and how you can use it to your advantage? Chat with your Toronto mortgage brokers for an obligation-free initial consultation today! Contact us via phone or via the form on the website and we’ll surely get back to you as soon as we can!

What is a Reverse Mortgage?

Rreverse mortgageseverse mortgages, also known as lifetime mortgages, are an alternative way to fund your retirement and stay in your home. Say you have a home worth $300,000, but no retirement savings. You don’t want to have to sell your home and then spend the best years of your life with living standards that are less than the ones you enjoy now; this is where a reverse mortgage comes in. You’ll be able to supplement an existing retirement plan, medical bills, day to day expenses and more. You can convert a portion of the equity in your home into cash; you won’t have to leave your home or pay it back.

Who is Eligible?

This kind of home equity loans is only available to persons of retirement age and older. You must own your home outright (no mortgages, liens or other issues on the property) or have a very low mortgage balance that can be paid off quickly with whatever you borrow against the home. The third most important thing is that the home must be your primary residence where you live. If you meet all of these criteria, you’ll want to speak with one of our Toronto mortgage brokers to see if it’s right for you.

What are the Differences Between a Reverse Mortgage and a Home Equity Loan?

A home equity loan is something that you have to repay or you can lose your home. A reverse mortgage on the other hand isn’t repaid during your lifetime. If you borrow 20% of your home’s equity, when your estate is settled the home will be sold and the 20% will be repaid. You’re not going to have to pay money back, but when your affairs are settled later. This means you’re going to be able to get the money you need to live comfortably now, but you won’t have to leave your home.

What’s the Downside?

You’re going to have to stay in that house or you’re going to have to sell the property and repay the loan. This means if you have to move to a retirement village or somewhere with a higher level of medical care, you’ll need to sell your home. You’ll want to make sure that you’re going to stay in this house for the rest of your life, or at least the best parts of it. This way you won’t have to sell your home and you can use the equity in your home as you see fit. It’s really the best way for most of us to make equity liquid.

Before you consider a reverse mortgage, you’re going to want to talk with someone who understands how they work. We as Toronto mortgage brokers can help you find the right financial solution for your equity. Why lose a 1/3 of your equity now just to sell your home when you can get as much money as you need out of your home and stay in it? Be comfortable and use your equity the way you want to!

Contact us today to learn more!

Is a Reverse Mortgage Right for You?

If you’re trying to tap the equity in your home and you don’t want to leave it just yet, a reverse mortgage can help you. Working with one of our Toronto mortgage brokers you’ll understand all the benefits and disadvantages of this kind of mortgage. Sometimes you might actually not need to go this route – you could even qualify for a home equity line of credit or mortgage refinancing instead. Here we’re going to talk about everything you need to know to make the right decision for you. Never make a decision without talking to your financial advisor or talking with one of our brokers first can help you come to the right decision.

What is a reverse mortgage?

A reverse mortgage is much like selling your home without having to actually sell – you don’t have to pay the money back, but you will have to give the bank your home when you pass on. If you’re retirement age or older, have a good deal of equity in your home and really understand the terms of the mortgage, it might be the right thing for you.

You’ll want to first speak with one of our Canada mortgage brokers to find out if you can qualify. You don’t have to borrow all of your equity – if you only borrow a portion, once the time comes the bank will recoup whatever you borrowed and the rest will pass on to your heirs.

What is mortgage refinancing?

If you just want to be able to pay off your mortgage faster and spend less on your monthly payments, you might want to think about mortgage refinancing instead. This will allow you to change the payment terms you have now, along with what interest rate and monthly payment you have. If you don’t want to borrow the money to fund your retirement and would like to have it later, this may be the way for you to go.

What is a home equity line of credit?

A home equity line of credit is like a credit card; instead of using your credit as collateral you’re using the equity in your home. This is just like taking out a second mortgage – but instead of getting one big lump sum, you’ll be able to borrow as much as you need, when you need it. This can be the way to go over mortgage refinancing and a reverse mortgage when you just need a safety net for a rainy day.

Which one is right for you?

It can be hard to figure out which one will work best for you, and that’s where we come in. We’re Toronto mortgage brokers that can help you understand just which option is right for you. The last thing you want to do is get a reverse mortgage when you don’t need one (or just don’t qualify for one yet); let us help you get the mortgage or home equity line of credit that will help you get the most for your equity.