If you’ve felt the financial pinch of inflation, you’re not alone. Inflation has drastically affected many people’s finances, especially those living on a fixed income. With people living longer and inflation eating away at their savings, many are turning to reverse mortgages to help them cover their costs.
Here’s how reverse mortgages can help you meet your financial needs without making drastic lifestyle changes.
How a reverse mortgage works
A reverse mortgage is a loan secured against the value of your home, and you can receive up to 55% of your home’s value. You retain the title of your home, and you don’t have to make any monthly mortgage payments until you sell the home or no longer live in it. At that point, you repay the loan value and the interest.
You choose whether you want the money in a lump sum or in monthly or quarterly deposits, or a combination of the two. This way, you can take care of any immediate financial needs–such as repairs and renovations to your home–or guarantee yourself money on an ongoing basis.
Reverse mortgages are available to Canadian homeowners aged 55 and older who use the home as their primary residence. When you apply, the lender will consider your age (if you have a spouse, you must both be at least 55 years of age), the location of your home, the type of home, the home’s condition, its appraised value, and the amount of equity in your home.
How reverse mortgages help you
In addition to providing you with a much-needed cash infusion, reverse mortgages have other benefits. If you’re worried you might have to move or downgrade your lifestyle, a reverse mortgage can give you the money you need to enable you to “age in place” comfortably in your home.
If you need to make any upgrades or renovations to your home to make it more accessible as you age, then a reverse mortgage can make that possible, keeping you safe and comfortable in your home even longer.
Economic downturns not only affect your cost of living but can have a drastic impact on your investments. With your finances stretched thin, you may be tempted to cash in your investments, but you’d likely get far less for them than if they had time to recover.
By using a reverse mortgage to supplement your income, you can leave your investments untouched for a while longer, giving them more time to recover their value.
Your reverse mortgage also won’t affect your government benefits, such as Canada Pension Plan, Old Age Security or the Guaranteed Income Supplement. You’ll still be eligible for the same benefits, and the money you access through the loan is tax-free.
Because you don’t have to make regular monthly mortgage payments on a reverse mortgage, it won’t cause a further burden on your finances.
What you can do with the funds from a reverse mortgage
The money from your reverse mortgage can be used for anything you need, including:
- Paying your monthly bills and expenses
- Upgrading or renovating your home
- Investing in another property
- Helping your loved ones financially
- Paying for unexpected expenses
- Aging in place in your home
- Travelling
Reverse mortgages come with borrowing costs, so it’s important to assess whether getting one is the right move for you based on your financial needs and how long you plan to stay in your home.
The bottom line
If you’re looking for a way to maintain your lifestyle without giving up your home and don’t want to cash in your investments, a reverse mortgage might be the right financial solution for you.
