How to Retire Without Selling Your Home
As you get closer to retirement, it is very important to understand how to utilize the assets you already own to enjoy your post-income years. Now, more than ever, Canadians are realizing that their home is more than just a nest egg that they can sell in their twilight years or pass on to their children, but instead it is a financial product that they can leverage to live a more financially liberated life.
When considering this, however, it is important for Canadians to determine if they are looking to downsize, live in their house for the rest of their lives and/or if they want to leverage their home as a financial asset.
If someone is looking to downsize their home, and move for example from a house to a condo, it is integral to understand all of the costs involved. So, speaking with a skilled financial advisor, mortgage advisor and realtor is very important. Especially with Realtors, interviewing multiple professionals to find the one that you feel meets your values and needs is important to finding the right home and selling for the right price.
There are, however, many who do not want to sell their home. In these situations, leveraging their home as an asset is a great way to build financial wealth even after they retire, and there are two key methods through which Canadians can leverage their home: the first is by refinancing, and the second is a reverse mortgage.
Refinancing a home is when someone takes out a mortgage of up to 80% of the value of their home. This is based on monthly interest and principal payments, and a full-time job is usually required. The benefit is that rates are near all time lows right now, so many Canadians are leveraging these low rates to generate liquidity and invest the money in the hope of realizing returns that are greater than the cost of borrowing. Of course, this can be a risky endeavour, but with the right investments, it is a strong way to build secondary income and retire with more capital.
Similarly, reverse mortgages are a model that continue to grow in popularity, because not only is an income not needed, if you (and your significant other) are in a situation where you plan to live in your home for the rest of your lives, you can leverage your home as a financial asset and borrow up to 55% of its value tax free and with no monthly payments. This is possible because the lender leverages your home equity as payment. This enables borrowers to have potentially hundreds of thousands of dollars added to their bank account to enjoy in their retirement, provide as a gift to their children, or for investments – all while never having to sell their home.
In the end, this is a large financial decision, so contacting your financial advisor is a great start. At our company Homewise, we work with thousands of Canadians who all have unique situations, and experience has shown us that making the right decisions when it comes to home financing in retirement can be integral to your legacy and quality of life.
About the author and Homewise
Jesse Abrams is the Co-Founder and CEO of Homewise. Homewise is a digital mortgage advisory that looks to provide tailored mortgage solutions to clients across Canada. With over $10 billion in Canadians served, Homewise helps Canadians save thousands of dollars in their borrowing experience, while providing a free mortgage advisor to guide them at each step.