Sale/Leasebacks May Benefit Canadian Seniors

Monday Jun 27th, 2016

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It sounds like an impossible dream: sell your home, pocket the money, then live in that home for the rest of your days. The premise is called “a sale and leaseback,” and it could deliver meaningful benefits to Canadian seniors.

Why seniors? Increasingly, retirees aren’t saving enough for retirement; therefore, many seniors need to fund their retirement, and often the way to do this is to cash out of their homes. But here’s their dilemma: where do we live now?

While you may sell your home for more than you paid for it, soaring prices in some areas may mean you are unable to purchase in the same neighbourhood or even the same city. And many are not yet ready for retirement residences.

It sounds as though, for many retirees, the sale and leaseback concept may be the answer: they collect the proceeds from their home and continue to live in it without any maintenance obligations or mortgages as renters.

But, as a recent Financial Post article points out, there are potential problems. If the new buyer were to default on the mortgage, then renters could find themselves without a place to live.

Also, the sale/leaseback must make financial sense to the investor, who may charge back a high monthly rent.

However, the following scenario might work well for some: sell to an adult child and pay rent for a “granny flat” in the home.

The child will be able to carry the cost of the home, and the retiree won’t have to leave the familiar neighbourhood, a win-win!

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