The Wealthy Barber Returns...David Chilton warns
The Wealthy Barber Returns
Home equity no substitute for retirement savings, Wealthy Barber author warns... [
David Chilton, author of The Wealthy Barber and The Wealthy Barber Returns, cautions “Don’t take debt into retirement.” This is terrific advice, but there are real world issues to consider here:
• First, not everyone has a choice about incurring debt late in life. Medical expenses, family problems, and investment decisions, good and bad, can make debt a part of extended living.
• Second, at some point, one shifts from saving mode to spending mode because you can’t take wealth with you. Usually “the kids” are in their 60's or older and self-sustaining, so paying your own way, in the style of your choice, takes priority. It takes more money every year to live even a simple life. The trade-off between down-sizing and aging in the home you love must be continually re-evaluated. However, the question is, “If you don’t spend your equity, who will?” Reverse mortgages will never suit every property owner, but they should be understood and considered so you always know all your options. These are not last-minute, last-resort products, but an option to be up-to-date on, so you have the widest range of choices possible for keeping the home and the lifestyle you love.
• Third, reverse mortgages allow access to the tax-free money in a property. This may be a relief for house-rich, cash-poor owners, but it may be a money management bonus for high-net-worth owners.
• Fourth, reverse mortgages can be arranged privately, within a family, so rates and terms may not be as extreme as those offered commercially.
• Fifth, even though it’s been more than two decades, the reverse mortgage industry is still in it’s infancy in Canada. We have only one national lender. It’s a start, but it's too early to give up on home equity conversion. The future could include more lenders to create an open competitive marketplace. Community-based lending programs could put reverse mortgages and other home equity conversion approaches to work to provide a full range of affordable housing in neighbourhoods across the country...stay tuned.
A reverse mortgage will be a best friend when there is no other option open to homeowners intent on their primary goal: to stay in the home and community they love. This financial tool allows access to tax-free dollars without selling and moving. If a property owner qualifies for a home equity line of credit or would be happy to sell and move, those options will be less expensive than arranging a reverse mortgage.
Reminder: What is a reverse mortgages?
Reverse mortgages are financial, lifestyle and wealth management tools that enable property owners to convert accumulated value or equity into cash without having to qualify by income, without having to sell and move, and without having to repay the debt until some pre-set time in the future.
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