WHAT WILL IT BE: GO MORTGAGE FREE, INVEST, OR CONTINUE TO WORK?
It’s nothing new. Exchanging your house in a suburb of the Lower Mainland for a home in the Okanagan or in the Comox Valley, will certainly allow you to put away money for your retirement or into some kind of investment.
For those who do move, they leave for different reasons. Whether seniors need the equity locked in their homes to pay expenses in retirement, or a young family chooses to relocate to a town where they can afford home ownership, the decision to speak to a financial advisor or mortgage broker should be your first plan of action.
Erik Norcott, a senior mortgage consultant with Assurance Mortgages, knows this scenario firsthand. He sold his 1,000-square-foot North Vancouver condo to buy a brand new 3,000-square-foot home in Kelowna.
“A financial advisor or mortgage broker can walk you through your options. I deal with a lot of relocators and there are several matters we look at,” Norcott says. “First off, you have to ask yourself, do you want to pay cash for that new home or get a small mortgage? Or maybe you want to get a larger mortgage and invest your money.”
If you decide to invest your money, choose something that nets you more than a three-percent return.
“We have seen historically low interest rates for awhile. However, I caution clients that if they invest their equity, they need to make sure that it is in one that they can access at the end of the mortgage term in case interest rates rise significantly.”
Another often overlooked issue is employment. If you work in Vancouver but live in Kelowna, lenders won’t typically accept that income to qualify you for a mortgage. Norcott says there are exceptions — freelancers (with proven income), and professionals such as doctors, lawyers and accountants.
Murray Leith, Odlum Brown executive vice-president and director investment research, cautions: “Before putting your house on the market, you want enough to make a material difference to your lifestyle going forward.”
“It’s pretty easy to quantify moving to another community and cashing out your equity… it’s the lifestyle part of the equation that many people don’t think through enough,” explains Leith. “I’ve had clients sell their homes to purchase a condo only to realize a few months later that they miss their gardens, or they’ve moved to a small community and find out it’s not what they expected.”
Without due diligence, Leith says that one of the worst things you can do is sell your home and move to a small town only to turn around and come back to the city.
“Besides the financial considerations, you want to choose a town where you and your family will be happy and fit into it,” Leith adds.
Other key considerations
• Retirees take note: are there healthcare facilities? Is there a hospital close by to meet all your needs as you age?
• For those with grandchildren, will you need a home large enough to accommodate overnight guests?
• If you frequently travel for work, an airport and transportation options are important.
• For young families, what are the schools like? • Consider the pros and cons of the city’s social amenities and recreational opportunities.
By Michelle Hopkins