Reverse Mortgages for Seniors in Ontario – Is This the Right Solution for a Senior Citizen in Debt?
In Ontario, seniors are amongst the most vulnerable when it comes to dealing with debt. With a steady influx of companies providing early retirement packages to employees, more and more seniors are finding themselves retiring with minimal income. More often than not, their income is not even enough to survive.
Once an individual has retired from the workforce his borrowing options become severely limited; this leaves him with his debt and little in the way of debt consolidation options. In many cases, banks do not lend to people who are on a fixed income (unless they have an asset or investment that they can offer as security).
Seniors who own their homes sometimes think that the reverse mortgage is the answer, and for some it may be, however, for most it is not. On top of that, a reverse mortgage is not so easy to qualify for.
Reverse mortgages are reverse loans where lenders, such as the Canadian Home Income Plan, will lend a senior up to 40% of their home’s value and either issue her monthly payments or a lump sum to help her supplement her income. The money does not have to be repaid until she dies, stops living in the home, or sells the home. The money then has to be repaid with interest and the interest rates are higher than what a regular mortgage would bear. This leaves little behind for children and grandchildren.
How about all the seniors who owe more than 40% of their properties value, or worse, don’t own homes at all?
CTV News recently reported that 1 in 3 seniors are retiring in debt. According to their report on a recent Statistics Canada study, 17% of retired Canadians, 55 years or older, who have debt owe more than $100,000.
The report also revealed that the median amount owed by retired seniors carrying debt was $19,000. Of the seniors over the age of 55 who have not retired, two-thirds carry a mortgage or consumer debt. And their median debt load is $40,000 – that’s about double that of retirees.
Increasingly, seniors are retiring with low incomes and according to the CARP pre-budget submission to the Standing Committee on Finance and Economic Affairs, among unattached seniors – 28.1% of men and 38.3% of women are considered “low income”.
This is why families have to take a stand to protect their aging parents and grandparents who are facing retirement with little in way of assets and income.
There have been Federal Government programs introduced over the past few years to help our seniors who are struggling with debt; many of them offer immediate debt relief and solutions that eliminate debt in very short time spans. This is crucial in the case of someone who is facing retirement or has just retired. The key is that our seniors have our support to help them make effective financial choices; in turn, they can retire without stress and worry over debt.