Many Quebecers rely on their property to ensure a comfortable retirement. But will its value be enough when the time comes?
The home is generally the largest investment we make in life, and the family residence often represents a large part, if not all, of Quebecers’ heritage. Given the circumstances, it’s logical that most of us hope that this one will worth securing our old age. But is this strategy still realistic?
Not enough money
Antoine Chaume Legault, financial planner and wealth management consultant at Assante Capital, emphasizes the need to be careful and calculate well. “We have seen a great increase in the value of real estate. Many retirees were unwilling to sell and wanted to continue enjoying their homes, but they also didn’t have enough money to support their standard of living,” he explains.
The financial planner states that if our real estate accounts for 50% or more of our net worth, we’ll likely need to use some or all of the value of our home unless we can benefit from a generous retirement fund.
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• Also read: Is it better to pay off the mortgage faster or invest the money?
Use the value of your property
On average, at least 50% of Quebecers’ wealth is owned by them. However, the accelerated rise in real estate values in recent years is serving them well and may give them a good boost in retirement.
One option is to use your home equity loan to prop up your standard of living and have the cash you need. “It is a valuable tool for financial flexibility. The margin can be as much as 65% of the market value of the property,” notes Antoine Chaume Legault, who also recommends paying minimal interest every month. This margin is eventually returned when the home is sold.
Don’t have access to a mortgage margin? The other option would be to take out a reverse mortgage. In this case you can use the value of your property without having to sell it. Borrowing up to 55% of this value is possible. These amounts are repaid when you move, sell the property or die of the last borrower. However, Antoine Chaume warns that interest rates on this type of product are high.
Sell to rent
If you are ready to part with your home, one solution is to sell it and then rent an apartment. So, you could invest the amount raised in the sale and hope for a good return on your investment as interest rates are currently low for various types of investments such as B. bonds are advantageous.
A good retirement even without property
Can you imagine a good retirement without being an owner? The answer is yes. “In the current context, with mortgage rates soaring, it might be more profitable to remain tenants. Still, we need to be disciplined and invest the amount equal to the difference between the rent and what a house or condo would cost us, rather than spend it,” said Antoine Chaume Legault. He estimates that more wealth can be accumulated this way than by owning it.
ADVICE
· If you are already retired, qualifying for a mortgage becomes more difficult. Plan ahead and get it from your financial institution before you leave the job market.
· Be careful not to treat your home like an ATM by constantly refinancing your mortgage. As a result, you do not accumulate any equity and experience a very unpleasant surprise when you retire.
· Approximately 50% of the wool sock is made based on the savings of the first 10 years. That’s why it’s important to start saving early and adopt a systematic approach to saving.