Your home is your single biggest investment and probably
your most valuable asset. Not only does it provide you basic shelter, it also
allows you to access cash against equity built up in it. As a retiree, you
could use this cash to pay your medical bills, hire a caretaker, help
grandchildren with university fees or pay off all other debt. There are three
options that you can consider when you decide to access your home’s equity – a
reverse mortgage, a home
equity line of credit and a gift of residual interest. Here is a brief
explanation of the three, as discussed in the Calgary
Herald.
A reverse mortgage allows you to convert a certain portion
of home equity in to cash. In such a loan, the repayment is deferred till the
owner’s death, the sale of your home or until you move out of your home. The
amount you can borrow is dependent on your age and your income. You can go for
a fixed rate of interest or a variable rate. If you live to a grand old age,
then the compound interest accumulated on this mortgage could equal your home’s
full value.
You can borrow against your home’s equity with an equity
line of credit, making monthly payments towards interest. To qualify for one,
you need to have a good credit score.
With a gift of residual interest, you can donate your home
to a charity and reserve the right to live in it till your death. In return,
you get an immediate tax break and a yearly income from your asset from the charitable
trust.
