As we age, our living needs change. The large family home that once echoed with the laughter of children may now seem overwhelmingly large and difficult to maintain. For many seniors, the solution lies in downsizing - a strategic move towards a smaller, more manageable living space.
But what is downsizing, and how can it be done effectively?
The Downsizing Dilemma
Downsizing, in its simplest definition, is the process of moving from a larger home to a smaller one. For seniors, this often involves a transition from a family home to a condo, an apartment, or a retirement community.
However, the process can be daunting, especially when faced with a lifetime of possessions. And the costs involved in downsizing are significant! In a typical downsizing process, here are some costs you need to consider:
- Costs to prepare your home for sale: These could involve painting, minor repairs to significant renovations.
- Moving costs: Budget anywhere from $2,000 to $10,000 for professional and insured movers.
- Junk removal/Decluttering services: Budget a few thousand dollars for these services also.
- Costs to fix-up your new home: These costs can vary depending on what needs to be done to get your new place move-in ready, especially if you are doing renovations to make the home suitable for aging in place (think ramps, safety bars, elevator or stair life, etc.).
This is where a short term, affordable loan product specially designed for older homeowners comes into play.
The CHIP Open Solution: A Bridge to Downsizing
The CHIP Open product from HomeEquity Bank offers a strategic solution to this common challenge. The CHIP Open is a reverse mortgage product designed specifically for short-term financing situations, perfect for seniors considering downsizing.
Who is HomeEquity Bank? HomeEquity Bank is a federally regulated financial institution and is the largest provider of reverse mortgages in Canada.
What are Reverse Mortgages?
A reverse mortgage is a loan that is only available to homeowners who are 55 years or older. It is designed for retired Canadians who are receiving pension income and does not require any monthly payments to be made for the life of a loan.
With a reverse mortgage, older adults can access the equity in their primary residence without selling it. Homeowners receive the loan funds as tax free cash. You can learn more about how a reverse mortgage works by reading our Guide to Reverse Mortgages in Canada and the Pros and Cons of a Reverse Mortgage.
Difference Between a CHIP Open and a Reverse Mortgage
A typical reverse mortgage does not have to be repaid until the borrower dies or sells the house. It could be in place for years and may require prepayment penalties to be paid when the loan is paid. The CHIP Open is a short-term 6 month reverse mortgage loan that can be paid at any time within 6 months. There is no prepayment penalty with a CHIP Open.
Let’s consider a hypothetical situation to see how the CHIP Open works.
A Case Study in Downsizing
Meet the Sampsons, a couple in their mid-70s. They live on a two-acre property in Caledon, Ontario worth $2 million. The property is becoming hard to maintain, and they're looking to purchase a townhouse in London, Ontario closer to their daughter.
However, they want to take their time moving and preparing their current home for sale. When they go to their bank, they are declined for a line of credit for $650,000 because they only receive pension income and do not qualify for the loan even though they have excellent credit. And since they haven’t already sold their home yet, they also cannot obtain traditional bridge financing from their bank.
With a CHIP Open, however, the Sampsons were able to access $650,000 from the equity in their current home, allowing them to purchase their new townhouse. The best part? There's no debt servicing and no monthly payments required.
With a CHIP Open, the Sampsons suddenly had the freedom to transition to their new home at their own pace and prepare their previous home for sale to maximize its value. Once their old home was sold, they repaid the full amount owed on the CHIP Open.
Key Benefits of CHIP Open
There are several key benefits to using CHIP Open for your home transition:
- Time: You can take your time moving, making the process less stressful and more manageable. This is especially beneficial when you're in the process of decluttering and simplifying your belongings or want to spread out your moving days.
- Flexible Dates: You can purchase your new home and sell your current one on your own timeline, potentially earning a higher sale price.
- Market Timing: With no monthly mortgage payments, you're not pressured to accept the first offer on your home. You can wait for the right offer to maximize your sale price.
- No Debt Servicing: Even if you don't income qualify to purchase your next home before selling your current one, CHIP Open makes this scenario possible, enabling a smooth transition to the next chapter of your life.
The Benefits of Downsizing in Retirement
Downsizing in retirement offers numerous benefits. It can reduce living costs, lower property taxes, and minimize the time and effort spent on home maintenance.
It also provides an excellent opportunity for decluttering and embracing a minimalist lifestyle, freeing you from the burden of unnecessary possessions while keeping your sentimental items.
Downsizing Assistance for Seniors
If you're a senior thinking of downsizing, it's important to seek help with downsizing. This could be from a professional downsizing diva or divas, a downsizing service that specializes in helping seniors transition to smaller homes.
They can provide a downsizing home checklist, downsizing guides, offer downsizing solutions for seniors, and provide the support you need during this transition.
A Downsizing Checklist
When it comes to downsizing, having a checklist can be incredibly helpful. Here are a few key points to consider:
1. Identify your needs: What do you need in your new home? Consider factors like location, accessibility, amenities, and size.
2. Sort and declutter: Go through your belongings and decide what to keep, what to donate, and what to sell. This can be a big job, so take your time.
3. Plan your space: Once you've chosen your new home, plan out where your belongings will go. This can help you identify what will fit in your new space and what won't.
4. Seek professional help: Consider hiring a professional downsizing service or a senior move manager to help with planning and moving.
Embracing the Future: The Upside of Downsizing
Downsizing can be a positive and liberating experience. It's about letting go of the unnecessary and making room for new experiences and opportunities. It's about simplifying your life, reducing your workload, and focusing on what truly matters.
So, if you're considering downsizing, remember that it's not just about moving to a smaller home. It's about making a lifestyle change that can enhance your quality of life, giving you more time, more freedom, and less stress. It's about rightsizing your life to fit you perfectly.
How to Get a CHIP Open
You can contact HomeEquity Bank directly to get a CHIP Open reverse mortgage. Alternatively, you can contact a licensed mortgage brokerage that specializes in reverse mortgages such as RetireBetter to expertly guide you through the entire reverse mortgage process.
We recommend working with a mortgage broker since they can advise you on the overall suitability of a reverse mortgage and provide you with alternative options if you are not eligible for a reverse mortgage.
Transitioning to a new home, especially after retirement, can be a significant change. But with the right tools and resources, it can be a smooth and stress-free process. CHIP Open by HomeEquity Bank is one such tool that can facilitate your transition, allowing you to move at your own pace and on your own terms. So, if you're thinking of downsizing, consider it not as a loss, but as a step towards a new chapter of life that's filled with possibilities.
Are you considering applying for a reverse mortgage? Choose RetireBetter, a leading specialist in reverse mortgages, to guide you through the process with care, clarity, and expertise. Our team understands that your home is more than just a financial asset, and we are dedicated to helping you use it to live your best retirement life.
Don't navigate the complexities of reverse mortgages alone. Contact RetireBetter today and work with one of Canada's top reverse mortgage teams. Secure your future the better way with RetireBetter!