HomEquity Bank and Equifax Canada recently commissioned a study on debt levels of Canadian seniors which analyzed different debt categories including mortgages, lines of credit, credit cards and car loans. HomEquity Bank is the bank which offers the CHIP reverse mortgage program to Canadians.
The key findings of the study were:
More seniors with mortgages in retirement
Seniors are taking on more debt to finance their retirement than ever before. The 10% jump in the number of Canadians aged over 55 who have mortgages points to a number of factors, including “grey” divorces and what Yvonne Ziomecki, senior vice-president of marketing and sales of HomEquity Bank, refers to as “right sizing”: “They are not downsizing. They don’t really need bigger homes, but they move into a house that has all the upgrades.”
Upgrades could mean anything from moving to another area to be closer to family, to ensuring that the home they are living in is accessible should they develop limited mobility, to simply getting the kitchen, bathroom and other features that they always wanted.
Dream of going into retirement without debt not possible for some
Life finds a way of knocking goalposts down the field. While the ideal situation is to pay off the home and retire debt-free, things like divorce, unexpected medical situations, and other significant events can prevent this from being a reality. The cost of living has gone up, pension and retirement contributions have gone down, and Canadian seniors and those who are going to be retiring soon are stuck right in the middle of it.
How a reverse mortgage can help
A reverse mortgage, unlike traditional loans and lines of credit, does not require monthly payments. This is attractive for seniors with a fixed income from retirement savings. You can only borrow up to 50% of the equity in your home, and it doesn’t need to be paid back until the home is sold.
You can also choose monthly or lump sum payments, which can help to supplement your retirement savings or cover major costs for one-time events. A lump sum payment can also help to settle debts that come at a higher interest rate than a reverse mortgage. A reverse mortgage is also cheaper than you would think, with interest rates being their lowest ever right now, it’s a good time to lock one down.
If you want to know more about getting a reverse mortgage, contact Horizon Equity today.