12:23 pm - Saturday November 1, 2014

What You Should Know About Reverse Mortgage

Reverse mortgages offered by the Canadian Home Income Plan (CHIP), a private company has opened an office in Montreal. You will find all necessary information on its website (www.chip.ca) and can even make your request.

Note that most chartered banks also offer the CHIP program, but not the Mouvement Desjardins.

The reverse mortgage is a loan secured by the equity in your house, which offers up to 40% of the estimated present value thereof, without you having to sell your property. It is available only if you are 60 years or more.

Unlike a traditional mortgage, you have no payments to make, neither capital nor interest until you or your spouse live in the house. Must repay the principal and interest only upon the death of the owner or upon the sale of the property.

Although it seems attractive, the reverse mortgage has two main weaknesses. First, you’ll pay a higher interest rate than that applicable to a traditional mortgage. Do not forget that the interest that add up to the amount borrowed, eat up the equity in the property. The other weakness, it is the cost. The borrower will pay $ 300 for an appraisal of his property, $ 400 for notary fees and $ 1,495 for closing costs to file.

Finally, a penalty that can represent from 8 to 10 months of interest will be required if the house is sold within three years after obtaining the loan.

Reverse mortgages can be an interesting product for seniors who want to absolutely keep their homes and have no children.

Clarification on withdrawals from the RRIF:

In the last issue, I dealt with the minimum withdrawals from a Registered Retirement Income Funds (RRIFs) based on the spouse’s age. However, some people have interpreted my answer as meaning that the player in question may take up to 89 years before making withdrawals from the RRIF. This is not true. It must convert her registered retirement savings plans (RRSPs) to RRIFs year for 71 years and make his first withdrawal the following year.

For cons, the calculation of minimum RRIF withdrawal may be based on age of spouse, if it is profitable for him. For example, if the spouse is younger, basing the calculation of withdrawals on the age it will reduce the amount withdrawn and subsequently reduce its taxable income.

What is a millionaire?

I would like your opinion about the definition of a millionaire, that he must have a capital of one million dollars, without taking into account the main property. To establish the capital available to me, should I take into account the tax payable on the amount of $ 357,000 placed in my RRSP ? My spouse says I am not a millionaire, if you subtract my capital tax that I pay on RRSPs. What do you think?

There are several definitions of the term “be a millionaire.” The strictest is that he who earns at least a million dollars a year is a millionaire. It’s so restrictive that even Warren Buffett does not meet this definition because his base salary is U.S. $ 100 000 per year.

The definition is less stringent determines that a person is a millionaire if she has a million dollars in net assets (ie total assets minus debt). According to this definition, you are a millionaire.

Between these two extremes, you can play in defining the concept of a millionaire as you want. For example, it is true that the capital account recorded as the RRSP is subject to tax. In this sense, the $ 357 000 in your RRSP worth about 30% less after taxes.

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