Nov. 8, 2021
You’re retired, and your CPP and RRSP aren’t quite enough income for your liking.
“Hey,” you think to yourself, “I’ve got some equity in my home. Why not use some of that?”
This week, In Your Corner looks at the best ways to start using that equity.
Moshe Milevsky, a finance professor at York University’s Schulich School of Business, is unequivocal about the best option.
“The only real way to monetize it is to sell and either downsize, or move somewhere where real estate is cheaper,” said Milevsky.
The next set of options, which Milevsky calls choice B, are taking out a fixed loan, home equity line of credit, or reverse mortgage. While those options all have the advantage of not having to move out of your existing home, they also share a couple of disadvantages, he points out.
“There’s risk in every one of those because no-one knows exactly where the real estate market will go, or what interest rates will be,” Milevsky said. (Reverse mortgages, typically, have the highest interest rates of those three options).
Another option, which Milevsky acknowledges might be awkward to bring up for some families, is to talk to the people who you intend to be the beneficiaries of your estate when you die. See if they can afford to give you a monthly stipend.
“You can tell them ‘you’re going to be getting this home or its value some day. Can you please help me out?,’” said Milevsky. If they squawk about that cutting into their inheritance, you can always point out that if you don’t get it from them, you’d likely have to borrow from a bank, which would be cutting into their inheritance anyway, Milevsky added.