Write a vision about how you want to live your life in retirement. Try your best to retire debt-free, including the mortgage on your house. Postponing CPP benefits until you are 70 will allow you to increase the amount you receive. Ask a financial planner to help you figure out what is best for you.
There is an increasing amount of retirees considering a reverse mortgage to relieve themselves from debt and monthly mortgage payments. A reverse mortgage is: a loan that is designed for homeowners 55 years of age and older (if you have a spouse, the age qualification applies to both of you). A reverse mortgage is secured by the equity in the home, which is the portion of the home’s value that is debt-free. It allows homeowners to obtain cash, without having to sell their home. Not all lenders offer reverse mortgages.
Disadvantages of a reverse mortgage:
– Reverse mortgages are subject to higher interest rates than most other types of mortgages.
– The equity you hold in your home will decrease as the interest on your reverse mortgage accumulates over the years.
– At your death, your estate will have to repay the loan and interest in full within a limited time. The time required to settle an estate can often exceed the time allowed to repay a reverse mortgage. For full details, check with the reverse mortgage lender.
– Since the principal and interest will be repaid to the lender at your death, there will be less money in your estate to leave to your children or other heirs.
– The costs associated with a reverse mortgage are usually quite high. They can include:
– A higher interest rate than for a traditional mortgage or line of credit
– A home appraisal fee, application fee or closing fee
– A repayment penalty for selling your house or moving out within three years of obtaining a reverse mortgage
There is no question in my mind that we have become a “plastic society.” A credit or debit card is much easier to put in your pocket than a handful of loonies or toonies. I would bet that the credit card companies had a party to celebrate the change from paper to coins.
Numerous studies have shown that the average person will spend more on a purchase if the purchase is made with a credit card or on a “pay later” plan. What if you do not have the money to pay when the bill arrives? Our parents/grandparents used to save the money to buy what they needed for cash. Granted, credit cards may not have been an option as credit cards were not widely available to the general population until the advent of the computer chip in the 1970’s. Notwithstanding, the principal of paying for significant purchase out of savings or a debit card is valid. Simply put, it keeps you out of trouble. If you cannot afford to put money aside to pay for the new TV, couch, bedroom set, kitchen renovation, etc., how on earth are you going to pay the bill when it arrives after you paid for it on a credit card. Be careful with purchases which do not have to be paid until next year – read the contract in detail and see what will happen if you do not pay the purchase in full on the due date. You will be forced into a high interest rate loan that drives up the cost of your original purchase. Be a smart consumer.
Many people in financial difficulty shy away from getting the most professional advice available, out of concern for social, financial, family, housing, or other consequences. Calling a Trustee in Bankruptcy can be difficult simply because they have “bankruptcy” in their names!
A federally-licensed Trustee is the most qualified person to assist you with your debt situation. Most offer a free consultation. This helps you to decide if you are comfortable with the Trustee’s approach, and to find out your best options, whether bankruptcy, a consumer proposal, or something else entirely. And more information leads to better decisions.