Reverse mortgage versus selling your home

When should you down-size your home?
The Toronto Star has a terrific story in an edition this week about the dilemma faced by many -- especially in the Toronto area.
The problem is this -- if a single person resides in a home worth about $600,000 and continues to have a relatively small mortgage, but this person is now retired so they have limited income. What can be done? Meanwhile, beyond savings, registered savings plans and federal pensions, this person may feel it's time to sell their home and down-size or take out a reverse mortgage.
Like most Realtors, I'm not a fan of reverse mortgages as they truly are lifestyle expensive and can quickly deplete your actual equity due to high interest rates attached. There are also expenses involved like a formal home appraisal and lawyer fees. To be eligible for a reverse mortgage you must be at least 55, but the good news is you could remove up to 50% of the home's equity you have earned and cash in for daily living expenses now (putting the remainder in a strictly budgeted equity), and still live in your 'family home'. 
I believe that age minimum should at least be increased to 62. Be sure to read about this home equity loan in the links below.
Steve Ransom of HomEquity Bank in 2013 explained it this way to The Globe And Mail:
“Our average clients are couples in their early 70s,” he says. “They’ve been retired for a certain time and they are on a fixed income. Interest rates are low so whatever they’ve been earning on their investments is less than they planned on and they’re saying, we need a little bit more money. They bought a house for $30,000 or $40,000, now it’s worth $400,000. They love their house, they don’t want to move, but the problem is how do you get at that equity? And that’s what we do.”

In the Toronto Star situation, it is recommended that the home owner should sell and use the equity to purchase in a significantly lower price range, such as a condo.
Paying rent for several years would never be the suggested option.
YOUR SITUATION
If you might be in a similar situation, give me a call. I do believe that many empty-nesters have difficulty releasing their desire to stay in their family home. In other words, I firmly believe it's very important to 'age in place' -- however, the place is the community you love and maybe not the large home, which also requires on-going upkeep and improvements. Not to contradict what I just presented, but naturally all situations are uniquely different. 

LINKS:
http://www.thestar.com/business/personal_finance/spending_saving/2015/02/12/retire-needs-to-consider-selling-her-house-money-makeover.html#
http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/the-pros-and-cons-of-reverse-mortgages/article12477397/
www.chip.ca

Mark Schadenberg, Sales Represenative

Royal LePage Triland Realty Brokerage

Email: mschadenberg@rogers.com

(519) 537-1553

Twitter: markroyallepage