Another option is getting a home equity line of credit (HELOC). This give access to your equity for an emergency or necessary purchase or repair.
I would not use it for a monthly withdrawal to meet a negative cash flow.
But if one has other savings or investments, the HELOC can be accessed as quick as writing a check, and it doesn’t interrupt longer term savings or investments like an IRA, etc.
Usually, I talk to my father about this stuff, since he knows it well. But I don't think Canadian banks practice it much because it's never come up in our talks.
I think we take more after the Brits when it comes to finance. Mark Carney, our current PM, used to be Governor of the Bank of England, so obviously there is some concordance between British and Canadian financial planning.
Reverse mortgage - that’s a product. HELOC - product. Mutual fund, annuity, CD - all products. Finserv wraps them in euphemisms and they don’t feel like a normal *thing* you buy because it’s your money or assets turning into more/different forms of money. Hocus pocus. But there are a bunch of wicked smart guys with a lot of abacusses trying to figure out how each product can make them money and then an equal bunch of wicked smart marketers with sharpies pitching it. My dad did a reverse mortgage once for a very specific reason and when he figured out the cost structure man he was mad. He paid it off quick but he got burned.
A lot of people assume they will die before the reverse mortgage comes due.
That way the house will be sold, the reverse mortgage will be paid off and your heirs will get the difference.
If you don't die, you will still have to pay it off.
So now you will have to sell and end up with less money.
Yes, I know Wilfred Brimley and Tom Selleck sounded so reassuring when they sold you the mortgage. Unless you are pretty sure about your end date, think about selling now instead of taking one of these suckers.
And if you have kids living with you, make sure they understand the hard numbers in paying this off if they want to keep the house.
Another option is getting a home equity line of credit (HELOC). This give access to your equity for an emergency or necessary purchase or repair.
I would not use it for a monthly withdrawal to meet a negative cash flow.
But if one has other savings or investments, the HELOC can be accessed as quick as writing a check, and it doesn’t interrupt longer term savings or investments like an IRA, etc.
Thanks, Dale!
Check your state bankruptcy laws if you want to use a HELOC for a negative cash flow.
The last I checked, in Maryland, a home with a mortgage has protection under bankruptcy. A home with a HELOC does not.
(If I have a moment, I'll try and verify.)
Usually, I talk to my father about this stuff, since he knows it well. But I don't think Canadian banks practice it much because it's never come up in our talks.
It's a very America idea.
I think we take more after the Brits when it comes to finance. Mark Carney, our current PM, used to be Governor of the Bank of England, so obviously there is some concordance between British and Canadian financial planning.
Reverse mortgage - that’s a product. HELOC - product. Mutual fund, annuity, CD - all products. Finserv wraps them in euphemisms and they don’t feel like a normal *thing* you buy because it’s your money or assets turning into more/different forms of money. Hocus pocus. But there are a bunch of wicked smart guys with a lot of abacusses trying to figure out how each product can make them money and then an equal bunch of wicked smart marketers with sharpies pitching it. My dad did a reverse mortgage once for a very specific reason and when he figured out the cost structure man he was mad. He paid it off quick but he got burned.
Damn. Sophisticated financial instruments are normally sold via "translation" into magic descriptions. I see those sharpies too.
Good, except for the kicker.
A lot of people assume they will die before the reverse mortgage comes due.
That way the house will be sold, the reverse mortgage will be paid off and your heirs will get the difference.
If you don't die, you will still have to pay it off.
So now you will have to sell and end up with less money.
Yes, I know Wilfred Brimley and Tom Selleck sounded so reassuring when they sold you the mortgage. Unless you are pretty sure about your end date, think about selling now instead of taking one of these suckers.
And if you have kids living with you, make sure they understand the hard numbers in paying this off if they want to keep the house.
Thanks, Bridget! This is why everyone should read the comments here.
You brought it to people's attention.
This is why people should subscribe to you.
😁
(And not trust actors selling things in reassuring voices. 🤬)
Thank you so much! I am definitely here to give an honest impression every time. I'm delighted when I find I can have a good conversation as a result!