Reverse Mortgages – Designed To Stay

Seniors Will Now Have Financial Security

Expenses are piling up, and you’re on a fixed salary.

Decisions must be taken. Do we sell the family home and downsize into a smaller home, or do we take the equity and move to a retirement community or an apartment? If you’re looking for more tips, Toronto Mortgage Broker Association has it for you.

Security is provided by the house!

The most emotionally difficult task for a senior, after losing a spouse or a close family member, is giving up their freedom by selling their house. Seniors have traditionally raised their families and witnessed life, both its joys and its difficulties, in the safety of their homes. What do seniors do when they are unable to meet their living costs but do not want to leave their homes? When it comes to supporting their elderly parents, adult children are often at a loss for words due to the minimal financial resources available to them.

Examine the Figures

Is it a good idea for senior homeowners who have a lot of equity in their homes to downsize?

We are now in what is known as a “buyer’s market.” There are fewer buyers and a greater inventory of affordable homes in this type of real estate market. As a result of reduced demand, one can expect a lower purchase price and higher selling fees due to increased marketing costs and the time it takes to sell a home. To cover their higher costs, many real estate agents have increased their commission rates; these fees will now usually range from 5% to 6% to sell a home in California. That means a real estate agent can charge a seller between $30,000 and $36,000 in commissions to sell a $600,000 home in the Los Angeles area. Closing expenses and potential state and federal capital gains tax on any net profit over $500,000 for married homeowners, or capital gains tax for any net profit over $250,000 for a single homeowner, are in addition to these commission fees.

If a senior intends to downsize to a smaller home, Proposition 13 can now be a double-edged sword. Unless the homeowner meets the restrictions imposed by Proposition 60, finds a property in a neighbouring county with a mutual property tax arrangement, or plans a transfer out of state, the senior will most likely be purchasing his new home at a tax base of 1% or more of the purchase price. As a result, downsizing to a $300,000 home would result in a new tax base of at least $3,000.00 per year. Increased property taxes are obviously not a problem if the homeowner is intending to move into a leased apartment or an assisted living environment; however, future real estate appreciation will be lost when moving from an owned home to a rented property.