Rising home prices in Canada and inflation have created a new set of challenges for Canadians, but some are unique for older Canadians. As they approach retirement, many have significant positive equity appreciation in their homes, but it is coupled with the problem of rising interest rates and increasing costs of home ownership. Many people have become paper millionaires but are finding it harder to make ends meet as everything about their home costs more.
My associates in the real estate market have many anecdotes about older clients looking to cash out their equity and feather their nest for retirement but reeling from the availability of suitable properties to downsize to and the costs of making this transition.
I have highlighted some thought starters below for those who are approaching retirement.
1. Make your Move before you Retire.
With the advent of early retirement and all that entails, many people need to pay more attention to foresee the challenges with their living situation before they make the big transition. Our clients have spent considerable time with a financial advisor contemplating the income side of retirement but much less considering the actual living side. The fortunate tend to focus on freedom, travel, hobbies, and passions rather than how these new ventures fit into their current living arrangements.
If your retirement plans include a move, downsizing, or plan to stay put, the time to contemplate that decision is before your retirement. Financing for renovations and a new property can become a big challenge once your income changes. If you require short-term or long-term financing on your real estate, you need to get a plan in place to ensure you are not left at the mercy of, as we say in my business, “limited options.”
2. Don’t Procrastinate
The adage, “he who hesitates is lost,” is never more accurate regarding your retirement living arrangements. I have seen many clients becoming emotionally attached to their homes during my years of practice. They can’t face the decisions required to make the financial decisions relating to their living arrangements or the emotional ones relating to moving to a safer, less expensive, or more suitable living situation until it is often too late. Once again, losing focus on these decisions tends to leave you with limited and often poor options when you are finally forced to make them. Your experienced mortgage broker can help you understand the challenges you may face with some of these scenarios, particularly regarding the financing options.
3. Be Honest with Yourself.
Retirement, like all phases of life, comes in different stages. Retirement planners often highlight the different phases of retirement and focus on planning around the funds to achieve your goals in each. But most times, they need to be more focused on how your living situation suits you in each of those phases. Suppose you dream of hosting your grandchildren for large celebrations in your family home. In that case, you must consider whether you can maintain the house physically and financially and how long you can do this. If you are blessed with good health and a secure financial situation, this may be less of a concern, but you need to consider if your situation will remain that way and what your contingency plan will be if one of those factors changes. Once again, remember the Boy Scout’s motto, “Be Prepared.”
4. Get educated!
There are multiple new products in the industry, and things may have changed since the last time you visited your bank or mortgage broker when you purchased your home; the internet is a good resource, but with all things, it is often best to speak with a qualified professional, get an idea of what your options are, there may be one or two you haven’t even thought of.