Reverse mortgage best option for seniors
Today's Toronto Star front page features a dejected senior citizen struggling to pay her rising municipal taxes. Purchased decades ago, mortgage long paid off, her house, in a groovy part of downtown, is now worth upwards of $700,000, having doubled in price in the last 10 years alone.
Written as a hard luck story, this "unfortunate" fixed-income senior can barely make ends meet, mortified of being forced to sell her long-time home.
Ironically, she is in an advantageous financial position, the article neglecting to mention she is the recipient of roughly $25,000 of unearned income annually -- the economic rent that capitalizes yearly in her house. Minus the $3000 municipal tax, her net benefit surpasses $20,000 per year. The 50% of Torontonians who rent should be so lucky as to receive such a tax free windfall each year!
So out of compassion for this senior, Toronto politicians contemplate subsidizing already wealthy people who appear poor. Perversely, by doing so, the city would be increasing inheritance sizes of relatives and friends.
The solution is simple and fairer to all. Irresponsibly, the reporter failed to mention that banks already offer reverse mortgages to allow house-rich, cash-poor seniors to remain in their homes as long as they wish. Alternatively municipalities should offer to defer municipal taxes in whole or in part till an owner sells.