According to the latest numbers from Statistics Canada, the baby boomer demographic is made up of almost 9 million Canadians. That’s around 24% of our total population. With numbers like this, it’s no surprise that this generation has always had great influence over our social patterns. And the housing market is no exception.
Lacking the financial anguish of Gen Xers or the ambivalence of the Millenials, baby boomers are to Canada’s housing market what goose down is to our pillows — comfortable and reliable. Here’s a look at how they are driving the recent reverse mortgage craze and what we can all expect as a result.
WHO ARE YOU CALLING A BABY BOOMER?
It’s true that the baby boomer generation casts a pretty wide net. Loosely baby boomers are defined as anyone born between 1946 and 1964. Today that means anyone between the ages of 55 and 73. And if you’re looking for precise numbers, that means about 8,843,374 boomers, give or take.
And when you’ve got that many people on your team, the world tends to listen when you talk.
WHAT IS A REVERSE MORTGAGE?
A reverse mortgage allows homeowners to access money that they have already invested into their home. One of the most popular reverse mortgages in Canada is a CHIP. Also known as a Canadian Home Income Plan. With reverse mortgages gaining more popularity, there has been a few new players added to the mix. Homeowners must meet certain criteria before they’re able to apply for this financial tool; namely that they are at least 55 years old and that their home is entirely paid for.
In layman terms, this means that a reverse mortgage is a loan that homeowners can take out and is backed by their home’s equity. So if you are over the age of 55, have paid your home off but need access to income, a reverse mortgage may be a good option.
WHO WANTS A REVERSE MORTGAGE?
In 2014, Deloitte did a study about Canadians in debt that revealed some interesting things about HomeEquity Bank’s 55+ clients. According to the study, there are four distinct categories of need based on the following criteria.
This is a group made up of baby boomers who are struggling to pay their bills without eating any of their savings or dipping into their investment portfolio. These boomers may be helping adult children who are struggling themselves to purchase a home or put themselves through school.
As we all know, life is unpredictable. Boomers dealing with unplanned expenses such as home repairs or healthcare needs that are placing an immediate, though often temporary, strain on their finances are apt to fall into this category.
VIVA LA VIDA!
These boomers may be empty nesters who, for the very first time in their lives, have the time and the opportunity to travel or enjoy their retirement in style, but lack enough funds to do it. They want to enjoy the years they have left in style and are looking for ways to finance their dreams.
This is a group of boomers who don’t want growing older to mean that they have to make concessions with their lifestyle. They’re not looking to live la vida loca, but they do want to be able to go out for dinner and a movie without fussing over the bill. Their portfolio may have taken a hit during the crisis, or some other unforeseen expense that has resulted in a leaner retirement fund than they had hoped.
IS IT A MATCH?
As a pragmatist, I tend to err on the side of caution; particularly when handing out financial advice to my clients. While the CHIP does not affect your home ownership, it is not for everyone. Just like other mortgage products there is no one fit for all. Even if you meet the qualifications for a reverse mortgage, another mortgage may be a better fit. If you own your home and are thinking about exploring your options including a reverse mortgage reach out or comment below.