Options for cash do exist for seniors

(NC)—Canadian seniors are feeling the impact of the slowing economy. Fifty-three per cent of those over 60 are worried about their financial future compared to this time last year, according to a 2009 Angus Reid study. What's more, 68 per cent of Canadian seniors are concerned about investment losses this year.

In tough economic times like this, many seniors are beginning to seek out additional sources of cash to meet their short and long term financial needs.

For Canadians aged 60 and older who don't want to sell their home or downsize, two options are available: a reverse mortgage or a home equity line of credit. But which is better? In short, it depends on the individual's overall personal needs and financial position.

Short Term vs. Long Term Needs

With a line of credit, you borrow money and begin paying it back (with interest) immediately. This makes sense if your needs are short-term and you can pay it back quickly. But what if you need the money for a longer period of time? Then you have to be prepared to make regular monthly payments for some time to come. If you're like many seniors living on a fixed income, these extra monthly payments could be too much for your budget to handle over an extended period of time.

A reverse mortgage is different because you can choose not to make any payments until you decide to move or sell your home. Instead, the interest simply compounds on the outstanding balance of the reverse mortgage over time while the entire value of your home appreciates over the long term. When you sell your house, you pay off the accumulated amount of the loan and keep the rest.

Unlike lines of credit, reverse mortgages are an excellent way to supplement your income on an ongoing basis. You can choose to access a fixed amount each month. Or you can take out a lump sum and use it to build an investment portfolio that will generate extra cash flow.

Canadian Home Income Plan (CHIP) allows seniors to receive up to 40 per cent of their home's current appraised value in tax free cash. CHIP provides an estimated amount based on the age of the homeowners, location and type of home, and its estimated value. Money can be taken in one lump sum or in planned advances over time. Additionally, CHIP Home Income Plan does not require any income or medical qualifications, which is not the case with home equity lines of credit.

More information on this topic is available online at www.chip.ca or toll-free at 1-866-522-2447.

Source: www.newscanada.com
Visit our website: www.thenewsleader.ca