Embarking on the golden years of retirement often comes with dreams of basking in leisure, and for many older individuals, that dream involves escaping to a vacation home. However, turning that dream into reality can pose a financial challenge, especially when savings are limited or tied up in your primary residence. The key to unlocking this dream may lie in a reverse mortgage.
Whether your ideal getaway involves the warmth of summer or the charm of winter, the vision likely includes cherished moments with the entire family. In the midst of the COVID-19 pandemic, the trend of multi-generational use of vacation retreats surged.
While this has brought families closer, it has also amplified the financial burden associated with maintaining, renovating, and paying property taxes on these properties. Retirees relying on fixed incomes may find their cash flow strained due to inflation, while their adult children grapple with their own financial responsibilities. The result? Families are dealing with the challenge of paying for essential upgrades to ensure the longevity of the vacation property for generations to come.
Whether you are looking for a vacation property to buy or you’re looking for a solution to ease the burden of maintenance costs a reverse mortgage can be a great tool for both.
The Reverse Mortgage Solution
When we talk about passing down the family cottage or vacation property, the usual strategies involve gifting or adding it to a living will. But let’s get real for a moment – one of the major concerns for people in their golden years is an unexpected passing. If that happens, their kids, who might be eyeing retirement themselves, could find themselves stuck having to sell the cottage because they don’t have the available funds to pay the capital gains needed when the time comes. Unless your parents were smart and put that vacation property in a trust having made you the beneficiary — but, that is a discussion for another time.
The question you are likely ready to ask is, “Can you use a reverse mortgage to purchase a home?” Turns out, you can get that dream vacation home if you have another property to level. Let’s say your primary home is mortgage-free and valued at $600,000, and you’ve got your eye on a sweet vacation spot. With a reverse mortgage, Canadians aged 55 and up who own a home can access up to 55% of the value of their primary residence and turn it into tax-free cash without having to move or sell. Then you can use these funds to pay for cottage renovations or upgrades, cover taxes or buy a new vacation property.
The money you receive from a reverse mortgage is considered a loan, so it won’t be part of your taxable income and won’t impact your benefits like Old Age Security (OAS). Plus, there are no monthly mortgage payments, which frees up extra cash for cottage upkeep and vacation travel. And, you won’t have to dip into your retirement investments and which you would end up paying taxes on at the end of the year.
Keeping Your Vacation Property In The Family
A reverse mortgage isn’t just about unlocking cash – it can also be your ticket to sprucing up that vacation spot, making it a cozy haven for you and your family all year long. Think winterizing, smoother pathways, added railings, sturdy staircases, updated plumbing, and overall improvements to make the place more accessible as you age.
HOT TIP: If you’re turning the property into your main residence, there might even be some tax rebates headed your way.
Let’s Sit Down Together And Look At The Numbers
Owning a vacation home is rewarding and, whether you’re looking for an escape from the Canadian winter or want to upgrade your existing cottage, I can help you find the right financing vehicle for you. A reverse mortgage is one of the best options but a home equity loan is also a possibility.
As an experienced and accredited mortgage expert, I can answer all your questions about vacation properties and how a reverse mortgage would work. I’ll give you the valuable, unbiased advice you need for your family’s unique financial situation. Let’s schedule a meeting today – I’m here to help. Give me a call today at (705) 315-0516 or click here to book a consultation with me and let’s get started.