A reverse mortgage, is it worth it? It is an interesting question. Reverse mortgages are definitely on the rise. There are now many commercials airing on TV stating the merits of getting one. But what is a reverse mortgage? Who is eligible? What are the pros and cons? Is it worth it?
What is a Reverse Mortgage?
Here’s a definition from the government of Canada website, “A reverse mortgage is a loan that allows you to get money from your home equity without having to sell your home. You may be able to borrow up to a certain percentage of the current value of your home. The maximum amount you will be able to borrow will depend on your age, your home’s appraised value and your lender.
You don’t need to make any payments on a reverse mortgage until the loan is due. This is usually when you move out of your home, sell it or the last borrower dies. You will owe more interest on a reverse mortgage the longer you go without making payments. This may result in you having less equity in your home.”
Who is Eligible?
The government of Canada website says that you have to be at least 55 years old, a homeowner, it has to be your primary residence. Also, if you have a mortgage or lien on your home, you have to pay it off when you get a reverse mortgage.
A person may turn some of the value of your home into cash, without having to sell it
You don’t have to pay tax on the money you borrow
This money does not affect the Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting
You still own your home
You may have options as to when and how you receive the money
Interest rates are higher than most other types of mortgages
The equity you hold in your home may go down as the interest on your loan adds up throughout the years
Your estate will have to repay the loan and interest in full within a set period of time when you die
The time needed to settle an estate may be longer than the time allowed to repay a reverse mortgage
There may be less money in your estate to leave to your children or other beneficiaries
Costs associated with a reverse mortgage may be higher than a regular mortgage or other lending products
Some Caution about Reverse Mortgages
As mentioned above, a reverse mortgage is a loan and with a loan there are conditions that have to be meant and this is where caution is needed. For example you required to keep up the value of the home by maintaining it. However, as you get older this could be harder to do and if your place fall into disrepair you could default on your loan and potentially lose your home. A similar scenario can happen if you do not pay your property taxes and home insurance.
Is it Worth it?
It depends. If you plan to stay in your home right up until you die and you have no beneficiaries to your estate then the reverse mortgage might be to your liking. But if you have beneficiaries you want to give money to after you die, or you plan to downsize or go into assisted living, then it might not be for you. So do your due diligence and do your research. Because a reverse mortgage is not free money but a loan that has conditions like other loans. So you need to be mindful.
Starting this week, a one time payment for older seniors will be sent out by the Federal government. The amount of this payment is $500.00. This payment is taxable. What are the criteria for receiving this payment?
One Time Payment for Older Seniors – Criteria
The government of Canada’s website lists two criteria for seniors to be eligible for this one time payment. First, the person would have to been born on or before June 30, 1947. Second, they would have to be eligible to receive the Old Age Security pension as of June 2021.
If you have applied for Old Age Security but have not yet been approved, you will receive the one time payment if you are approved for Old Age Security retroactively to June 30, 2021 or earlier.
How Will I Receive My Payment?
The government’s website above says that if you receive your Old Age Security by direct deposit, then the one time payment will be directed deposited to you in the week of August 16, 2021. If you receive your Old Age Security by cheque then you will receive the one time payment by cheque.
Finally, no taxes or deductions will be taken from your one time $500 payment. However, because it is a taxable benefit, you will be sent a tax slip and you will be required to declare this amount on your income tax return for 2021.
The one time payment for older seniors is a nice little boost for them during these difficult times. Many seniors have very little income, so anything extra can go a long way. If you are eligible, make sure that you have applied for Old Age Security to make sure you will receive this payment as this is free money. Actually nothing is really free but this is as free as it can get.
A few days ago, the Minister of Finance gave Canada budget 2021 highlights. She indicated that there would be 101.4 billion dollars in new spending over next three years. The goal is to recover from the pandemic and kickstart the move to a greener economy. So what are some of the main highlights of the budget?
Canada Budget 2021 Highlights – Main Points
Here are some of the main highlights of the 2021 budget taken from the government of Canada’s website and CBC’s website below. Both those sites go into great deal about the budget but here are the main highlights below:
-Extending the Canada Emergency Wage Subsidy, the Canada Emergency Rent Subsidy and Lockdown Support until September 25, 2021.
-Extending the weeks available for the Canada Recovery Benefit and the Canada Recovery Caregiving Benefit.
-Increasing the Employment Insurance sickness benefits from 15 to 26 weeks.
-Taxable grant payment of $500 to Old Age Security pensioners age 75 or older as of June 2022 and a 10 per cent boost to maximum OAS benefits for pensioners 75 or older starting July 1, 2022.
-$18 billion to build safer, healthier Indigenous communities.
-$17.6 billion for green recovery which means to conserve 25 per cent of lands and oceans by 2025. Also, put Canada on course to exceed climate change targets by cutting emissions to 36 per cent below 2005 levels by 2030.
-A new $15 federal minimum wage.
The above are some of the main highlights of the budget. The government’s plan is ambitious but opponents are worried about the excess spending and huge debt that will be incurred. Will the government’s plan work? Only time will tell as life is pretty unpredictable right now.
Canadian Seniors will receive a one time covid-19 relief payment this week as announced by the government earlier in the week. The goal is to help seniors curb rising costs for things such as grocery deliveries and prescriptions. During this pandemic, seniors have been one of the hardest groups affected. This payment is one way that the government wanted to lightened their load. This one-time payment is tax free.
Canadian Seniors Receive Covid-19 Payment Relief, How Much?
Canadian seniors can receive up to $500.00 in a one-time payment from the government. Here’s the breakdown from a recent article below:
“Any senior who is eligible for the Old Age Security (OAS) pension will receive a $300 payment, and an additional $200 is being sent to seniors eligible for the Guaranteed Income Supplement (GIS).
The federal government estimates there are currently 6.7 million seniors who are eligible for the OAS pension and 2.2 million who are eligible for the GIS. These payments are set to total $2.5 billion.”
Canadian Seniors Receive Covid-19 Paymet Relief, When and How?
The payment is directly made to any senior who is eligible. No application is needed to apply. Here are the payment details from the same article:
“Seniors who reside in Canada can expect to receive the payment by direct deposit or cheque this week, whereas seniors who reside outside Canada can expect this one-time payment in July for those on direct deposit, or by cheque with delays given international postal disruptions,” said the government in a statement.
For Canadian seniors, any help is good as they have been hit hard by COVID-19. As a result, they have to take extra precautions to stay safe. This has resulted in taking on a greater financial burden with limited income for many. Because of that, Canadian seniors will gladly accept the covid-19 one-time payment as every little bit helps.
On May 12, 2020, the Canadian Government announced additional support for seniors during covid-19 to help them offset the increased cost of living resulting from the pandemic. Also announced was measures to help seniors deal with isolation and improve their quality of life. Finally, there was an extension of payments and allowances for seniors. Let’s take a look at each one of these new supports one by one.
Additional Support for Seniors During Covid-19, One Time Tax free Payment
The prime minister announced a one time tax-free payment of $300 for seniors eligible for the Old Age Security (OAS) pension, with an additional $200 for seniors eligible for the Guaranteed Income Supplement (GIS). This would give a total of $500 to individuals who are eligible to receive both the OAS and the GIS. The goal is to help seniors cover increased costs caused by the pandemic.
Additional Support for Seniors During Covid-19, Additional Funding to New Horizons for Seniors Program
The Government also announced that it is investing an additional $20 million dollars into the New Horizons for Seniors Program. The is to help support organizations that offer community based projects that help reduce isolation, improve the quality of life for seniors, and help them maintain a social support network.
Additional Support for Seniors During Covid-19, Extension of Allowance Payments
The government is temporarily extending seniors’ GIS and Allowance payments even if their 2019 income information has not been assessed. This will ensure that the most vulnerable seniors continue to receive their benefits. Also, seniors are encouraged to submit their 2019 income information as soon as possible and no later than by October 1, 2020. By doing so, they will avoid an interruption of benefits.
The government is trying to help the most vulnerable people affected by this pandemic and many seniors definitely fall into this category. The latest measures announced are a way to address this and hopefully many seniors can apply and will be helped by this. Even if the amounts are small, it is all a help. As the old saying goes, every little bit helps.
Will CPP payment dates change during the coronavirus pandemic? It is a logical question to ask as the government is currently involved deeply in “The Canada Emergency Response Benefit” program. This CERB program helps individuals who’ve lost their jobs because of Covid-19. The CERB also helps business owners with grants and loans. As a result, Canadians on CPP might be concerned that this will affect their payments. Will their payments be affected? Will the dates they will receive their payments change? The answer is no.
CPP Payment Dates Stay the Same
Here’s what the federal government’s website has to say regarding this issue: “If you receive federal benefits, including some provincial/territorial benefits, you will receive payment on these dates. If you set up direct deposit, payments will be deposited in your account on these dates.”
Here are the CPP payment dates below for the rest of 2020. This includes the Canada Pension Plan (CPP) retirement pension and disability, children’s and survivor benefits.
January 29, 2020
February 26, 2020
March 27, 2020
April 28, 2020
May 27, 2020
June 26, 2020
July 29, 2020
August 27, 2020
September 28, 2020
October 28, 2020
November 26, 2020
December 22, 2020
If Applying for CPP, Apply Online Due to Covid-19
If you are applying for your Canada Pension, the government strongly suggests you apply online as the process has been simplified to make it easier for you. Notice what the government’s website says about this below:
An important note for people applying for Canada Pension Plan, Canada Pension Plan Disability or Old Age Security.
Due to the COVID-19 pandemic, Service Canada is strongly encouraging you to apply for these benefits online, from the comfort of your home. You will not be required to submit documentation to support your application at this time. Service Canada may be requesting these documents at a later date, but in the meantime, we can begin working on your application.
CPP payment dates will not change amid Covid-19, and that is a relief for many Canadians who depend on these payments. The coronavirus has brought a lot of anxiety to many people, especially our seniors so at least this is one less thing to worry about. And that is definitely a good thing!