You Don’t Have to Sell Your House to Retire

February 11, 2013 · Print This Article

One in three Canadians downsize their home in order to find money to retire, according to a Bank of Montreal report. The same report implies that many Canadians rely on their home prices to increase so that they can fund their retirement in this manner. We say, why wait?

Why Downsizing to a Condo Makes Zero Sense
In many cases, Canadians are selling their homes to move into a slightly smaller condominium or townhouse, according to the same report. When you do this, you may be freeing up immediate capital, but you also expose yourself to expensive recurring fees in retirement in the form of condominium and maintenance fees, many of which approach the same levels of what you may have paid for rent on an apartment in the 80′s or 90′s. Essentially, you’re selling your home for a short-term gain that will be bled out of you by these fees over time. It’s a no-win situation.

If you’re looking at downsizing to reduce the amount of square feet of house you have to clean, or to move to a more senior-friendly one-floor home, that makes sense. Just don’t do it for financial reasons because there are better solutions out there.

CHIP Home Income Plan Lets You Keep Your House
The CHIP Home Income Plan is an excellent alternative to selling your house. You`ll be able to stay in the home that you love and age in place with friends and family. You’ll also be saving those pesky condo fees and the costs associated with moving. While you do need to pay back the loan when you sell the house, that will be at a point when your retirement is nearing its completion and you won’t need the funds like you do now.

Not a Problem if Your Home Value Doesn’t Rise or Even Falls
Industry experts are predicting a cooling of Canada’s housing market in the near future. If you take out a reverse mortgage under the CHIP Home Income Plan, you’ll never be obligated to pay back more than the cost of your home, even if the price of your home falls below the amount of your loan.

Long-Term Retirement Planners Should Diversify Their Portfolios
In order to avoid making decisions about using your home equity as part of your retirement, consider diversifying your portfolio with TFSAs, investments in the stock market, currency, or any other investment vehicles that make sense to you. Relying on home equity for retirement is putting your eggs in one basket, and that never makes a good portfolio.

For those who are a bit closer to retirement and find themselves coming up short when they punch in the numbers, a reverse mortgage against home equity is probably the safest way to “mind the gap”. Plus, each transaction must be independently reviewed by your lawyer, so if they see anything that isn’t to your advantage you’ll be covered.

Contact Horizon Equity today to find out more about reverse mortgages and how you can age in place in the home that you love.