Key Takeaways
- Seniors are unable to downsize due to a shortage of suitable housing options, which has been made worse by the overall housing shortage in Canada
- Seniors are increasingly choosing to live in their existing homes and “age in place”
- Reverse mortgages can allow homeowners over the age of 55 with the financial resources to avoid the costs of downsizing and to comfortably age in place
Introduction
A recent report by The Globe and Mail has shed light on an intriguing trend among Canadian seniors: a growing number of them are living in homes larger than they need, with many bedrooms going unused. This trend is driven by an aging population, the lack of suitable housing for seniors, the high cost of smaller housing alternatives, and the housing shortage in Canada.
We’ll summarize the article and examine a possible solution for homeowners facing this increasingly common dilemma.
The Downsizing Dilemma: A Closer Look
The Globe article points out that the percentage of singles and couples living in homes with a minimum of three bedrooms increased to 29 per cent in Canada in 2021, up from 26 per cent in 2006. This suggests that a growing proportion of people are living in homes that are larger than they require and staying in place as they age, rather than downsizing.
Aled ab Iorwerth, deputy chief economist with Canada Mortgage and Housing Corp., the federal housing agency, is quoted in the article saying, “The concern is maybe the people with all these spare bedrooms would like to move somewhere in their community but there is nowhere more suitable for them to live in.”
Housing Shortage and Lack of Suitable Housing for Seniors
One of the critical factors contributing to seniors not downsizing is the housing shortage in Canada and the lack of available housing suitable for seniors. The article highlights that many seniors are unable to find suitable housing that meets their needs within their communities.
The options available, such as condos with high monthly fees or long-term care homes, are often unattractive. Moreover, the general housing shortage facing all Canadians just makes the problem worse for seniors. Toronto realtor Lisa Bednarski, who works with seniors, said in the article, “It really has little to do with cost and more to do with not having an answer to ‘Where will I go?’”
The Hidden Costs of Downsizing
Downsizing is often presented as a solution for seniors living in larger homes, but it comes with its own set of challenges. The process of selling a home, buying a new one, and moving can be expensive. There are real estate fees, land transfer taxes, legal fees, moving costs, and potentially significant costs to refurbish or renovate the new home to make it suitable for the senior's needs.
Moreover, the emotional cost can be even higher. Downsizing often means leaving a community they've been a part of for years, losing touch with friends, and disrupting routines.
To learn more about the subject, you can read:
Aging in Place
By not downsizing, for whatever reasons, effectively seniors are dealing with the issues of aging in place. Aging in place is becoming increasingly popular in Canada, which supports the overall premise of the Globe article.
To learn more about aging in place, you can read:
Ultimately, regardless of what you call this trend in seniors housing, retired homeowners should learn how to manage living at home in their retired years.
The Reverse Mortgage Solution
This is where reverse mortgages come into play. Briefly, a reverse mortgage is a loan that allows homeowners aged 55 and older to convert the equity in their principal residence into tax-free cash, without having to sell their home, give up the title, or take on a new monthly mortgage payment. The homeowner does not need to repay a reverse mortgage until they sell the home or pass away.
One of the key benefits of a reverse mortgage is that it allows seniors to stay in their homes while accessing the equity they've built up. This can be particularly beneficial for those who are "overhoused" but wish to remain in their communities.
Homeowners can receive the money as a lump sum or as a home equity line of credit. They can use the money received from a reverse mortgage to cover living expenses, healthcare costs, or even home modifications to make their homes more age-friendly.
To learn more about reverse mortgages, you can read:
Avoiding the Emotional Toll of Downsizing
With a reverse mortgage, seniors can avoid the emotional hardships associated with downsizing. They can continue living in their homes, maintaining their lifestyle, and staying connected with their communities. As Bednarski pointed out, most seniors want to stay in their neighborhood, shop at the same grocery store, and stay near their community. A reverse mortgage can make this possible.
Addressing the Housing Shortage
The housing shortage and the lack of suitable housing options for seniors are significant issues. As the Globe article mentions, policy experts and city mayors are looking at ways to build more densely on residential land that is zoned for single-family homes, in an attempt to create duplexes, triplexes, and other low-rise multi-residential housing options for seniors and other buyers.
However, this is a long-term solution for the housing market and doesn’t address the immediate needs of seniors who are currently “overhoused.” Reverse mortgages can be a bridge for seniors during this time.
By tapping into the equity of their current homes, seniors can have the financial means to wait for more suitable housing options to become available without the pressure of having to downsize immediately.
Summary
The trend of seniors living in larger homes with empty bedrooms is a complex issue, influenced by the housing shortage, lack of suitable housing for seniors, and the costs and emotional toll associated with downsizing. Reverse mortgages offer a viable solution for seniors to remain in their homes and communities while accessing the equity they have built up over the years.
This financial tool can provide seniors with the flexibility and resources they need to make the best decisions for their living situations amidst the current housing challenges in Canada.
FAQ
Q. Can I get a reverse mortgage from my regular bank?
A. HomeEquity Bank and Equitable Bank are the only banks in Canada providing reverse mortgages. Homeowners must be 55 years or older to apply for a reverse mortgage.
Q. How much money can I borrow with a reverse mortgage?
A. Most reverse mortgage products allow you to borrow up to 55% of the value of your home. Some products allow you to borrow up to 59% of the value of your home.
Q. Should I use a mortgage broker to get a reverse mortgage or deal directly with the lender?
A. By using a mortgage broker who specializes in reverse mortgages, you can benefit from their experience and knowledge and ensure you are receiving the best product at the best interest rate. Mortgage brokers do not charge you for arranging a reverse mortgage, as they are paid directly by the lender.
