A reverse mortgage can provide a lump sum to pay off their line of credit and credit cards and top up their bank account. It can also accept payments over time to supplement its cash flow.
The catch with a reverse mortgage is that the interest rate tends to be higher than a traditional mortgage or line of credit. But if it allows your daughter to stay home longer, it might be a good option. Especially if she’s going to rack up more credit card debt at much higher interest rates otherwise.
When to sell and rent, or when to keep a home?
She could sell and rent, Joan, but I think the key is how important it is to stay in her home for a few more years. She might even try to put her house up for sale on the condition that she wants to rent the property to the buyer. This may limit potential buyers, but she could also end up with a landlord who appreciates the instant rental from someone who obviously loves the house. Then she receives money and can also stay at home. She’ll want to talk to a real estate agent and a lawyer and consider a multi-year emphyteutic lease to try to reduce the risk of having to move.
Are you insured if you have more than $100,000 invested?
If your daughter is selling the house, the $100,000 Canada Deposit Insurance Corporation (CDIC) coverage limit you mention should not be a limiting factor. CDIC is a Crown corporation that insures deposits in the event of member default. Some banks have the ability to issue savings accounts or guaranteed investment certificates (GICs) from several divisions which are all CDIC member companies. RBC, for example, has Royal Bank of Canada, Royal Bank Mortgage Corporation, RBC Investor Services Trust, The Royal Trust Company and The Royal Trust Corporation of Canada. She can therefore multiply the $100,000 limit.
Credit unions across the country have different insurance limits depending on the province. There is a $250,000 limit to the deposit insurance reserve fund (DIRF) for members, for example. British Columbia, Alberta, Saskatchewan and Manitoba insure 100% of eligible deposits at member institutions.
Another way to ensure investment insurance coverage is that she could have money in several institutions to ensure that she does not exceed the applicable limits.
GIC rates have started to rise recently. It could generate a higher long-term return by investing in stocks, as well as fixed-income investments like GICs and bonds.
Even after paying off her debt, she would likely have hundreds of thousands to invest after selling her home for $800,000. This could give him access to many different investment advisers and portfolio managers, both at the bank and with private investment firms.