In one way or another, we have all been impacted by the coronavirus. In fact, almost two-thirds of Canadian households suffered from loss of income due to job losses or temporary layoffs and furloughs.
While negative impact is recognized across all generations, millennials seem to have been hit the hardest. According to research by TransUnion, 76% of Canadian millennials are feeling the burn from COVID-19, largely stemming from a reduction in work hours, losing their job or a partner losing their job.
For older Canadians looking to help their families cope with financial burdens due to COVID-19, many may consider withdrawing from retirement savings, or selling assets to generate cash. While these strategies can certainly increase liquidity, there are risks and long-term impacts that should be considered.
“These strategies could negatively impact their future retirement income. But selling off their assets in such an unpredictable environment only adds risk and uncertainty to the equation” said Agostino Tuzi, National Director, Mortgage Broker Channel at HomeEquity Bank.
One potential solution to consider would be taking a reverse mortgage. It’s an option that’s been helping Canadians in their sunset years access cash for several reasons, whether it’s travel, paying off debts or helping family members out. In fact, even before the pandemic, a record number of Canadian seniors were tapping into their home equity to help pay their debts.
Reverse mortgages have been growing by over 28% annually across the country. In 2019, HomeEquity Bank reported a record $820 million in reverse mortgages originations, up from $309 million just five years ago. They offer the CHIP Reverse Mortgage, previously known as The Canadian Home Income Plan, which allows borrowers 55 years and older to access up to 55% of their homes value without having to sell, and use those funds to help support family members. This is a long-term solution that is flexible, allowing homeowners to withdraw funds either in a lumpsum or monthly installments, and it doesn’t require any payments before moving or selling.
“That’s something people often forget,” said Tuzi. “Because we don’t require any regular mortgage payments until the homeowner moves, sells their home or passes away, a reverse mortgage is essentially a lifetime deferral plan.”
While the CHIP reverse mortgage has become a popular option among retirees who just wanted to reach a bit deeper into their pockets, it’s now becoming an increasingly important solution for families who want to lend a helping hand to their loved ones. For many Canadian seniors, their home is their greatest asset, but also their greatest source of comfort and wellbeing. Now, through a reverse mortgage, that very home can also be a source of multigenerational relief, as families come together to make it through the tough times.