The Benefits of Exploring Home Equity Options for Your Retired Clients
Even in the best economic environments, your clients may have trouble funding their retirement. But, with high inflation, market volatility, and interest rate hikes, today’s economic environment is far from ideal. That’s why it’s even more important than ever to leave no stone unturned and explore all your clients’ options.
For most of your clients, retirement income is likely made up of savings, money tucked away in a TFSA or investment portfolio, RRSPs, or even pension plans. However, for many of your clients, even if they were successful in accumulating all these assets, it still may not be enough. Why?
Canadians are living longer than ever
According to StatCan life expectancy data, Canadians who retire at 65 can expect, on average, to live an additional 20 years. And this does not even consider future mortality improvements. Your clients, and all Canadians, are living longer, healthier, and more productive lives, and there’s a growing need to explore products that could help them live out retirement without fear of outliving their money, given that their retirement could represent up to a third of their life.
Canadian homeowners have options
For many Canadians, a reasonable retirement strategy was to build up the equity in their home and then, when the time came to retire, downsize and use the excess proceeds to help fund their retirement.
This could absolutely work for your clients if they not only downsize their space but their lifestyle and cost structure as well. If clients still have a mortgage, they could spend less on payments. Less space also can reduce costs by lowering utility bills and consumption, while also freeing up time otherwise spent on home maintenance.
However, there are definite downsides to downsizing. Clients must be comfortable with less space and the expected lifestyle change. Downsizing also means your clients leave the home and community they love.
While some clients will still elect to downsize their homes, the majority of Canadians report a desire to age in place. Many of your clients may not want to move but need a solution to help them remain in their homes. There are products designed specifically to address this challenge.
Home Equity Line of Credit (HELOC)
Many retired Canadians explore a Home Equity Line of Credit (HELOC). HELOCs are a good short-term borrowing option for people who can pay the interest and loan back in the near future. Some of the highlights of the product include lower interest rates than credit cards, tax-deductible interest, and flexible withdrawal and repayment programs.
However, it is equally important to appreciate the downside risks for your clients. For example, their home becomes collateral for the loan, their home equity stake is reduced by the amount borrowed, interest rates could continue to increase, and there are still monthly payments required.
CHIP Reverse Mortgage by HomeEquity Bank
Unlike a regular mortgage or HELOC, the CHIP Reverse Mortgage does not require the homeowner to make regular mortgage payments. The loan is repaid only when the homeowner no longer lives in the home. The funds received are tax-free, and your clients can rest assured that they’ll maintain full ownership and control over their homes. The CHIP Reverse Mortgage also comes with a No Negative Equity Guarantee, so your clients will never owe more than the fair market value of their property.
The best part is that your clients can use the funds from a CHIP Reverse Mortgage for whatever they need, such as debt consolidation, home renovations that allow them to age in place, or even leaving a legacy by way of an education fund or helping grandkids get into the real estate market.
When helping your clients fund their retirement, it’s important to show them that they have options and, by empowering them with an understanding of the pros and cons of these options, they can make the choices that are right for them and their families.
To learn more about how the CHIP Reverse Mortgage by HomeEquity Bank can help your clients fund their retirement, speak with a HomeEquity Bank BDM.
~ Pattie Lovett-Reid
Chief Financial Commentator
- Posted by ajoshi
- On February 21, 2023
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