Don’t Count on Rising Home Prices to Finance Retirement: Carney
March 7, 2013 · Print This Article
When home prices were skyrocketing and the airwaves were filled with stories of amazingly profitable house-flipping projects, it may have been tempting to think that your property’s continuously inflating price could be counted on to carry you through your retirement years. Like the goose that laid the golden egg, if you just sat on your house long enough, you could sell it for a good chunk more than what you paid for it. But the outgoing Governor of the Bank of Canada, Mark Carney, has spoken out to warn Canadians not to count on rising house prices when making plans for retirement.
Resale Rates May Not Be Reliable
In Carney’s opinion, house prices cannot remain at these high rates for much longer, and homeowners in Canada would be wise not to rely on continually growing resale rates as a way to fund or cushion their retirement savings. These skyrocketing housing prices aren’t really the norm and Canadians shouldn’t count on the trend to continue, especially when it comes to planning for retirement, Carney told CTV’s Question Period. Instead, he advises building “real wealth” through innovation and hard work, rather than waiting for your property’s price to spontaneously inflate.
Take Advantage of Your Home’s Worth Now
With today’s low interest rates and no guarantee your home will be worth more down the line, Canadians who are nearing retirement may find that a reverse mortgage is a fitting solution for their retirement needs. With a reverse mortgage, people over 55 years of age can borrow money against the value of their property. As long as you continue to own your home, you don’t need to make repayments against the principle or interest.
Flexibility of a Reverse Mortgage
By taking out a reverse mortgage now, you not only get to take advantage of today’s lower interest rates and your home’s current market value, but you can also enjoy your home’s equity right away rather than having to wait another decade or more to see if your property becomes more valuable. And, of course, there’s no way of knowing what interest rates will be like a decade from now. Since they are currently at a historical low, it’s a safe bet that you’ll be paying more to borrow in ten years.
Even if the value of your property grows higher than what you originally paid for it, you still need to sell your house to take advantage of these resale rates. But with a reverse mortgage, your property’s equity is turned into money you can use, while still allowing you to live in your own home. Of course, a reverse mortgage isn’t right for everyone: you should speak to your financial advisor to see if taking out a reverse mortgage is a viable option to kick off your retirement years in style. Talking to a lawyer is a part of the reverse mortgage process too, so you’ll be very well-advised before you sign on the dotted line.
No Obligation to Pay Back More Than Your Home is Worth
Another great feature of a reverse mortgage is that you are never obligated to pay back more than the value of your home. This means that should housing prices take a serious fall between the time that you take out your reverse mortgage and the date you have to sell your home, you are insulated against any shortfalls that may occur.
If you want to find out more about reverse mortgages, Horizon Equity’s helpful staff are ready to take your questions. Just contact us today and we’ll be very happy to help you out.