While America may believe they Run on Dunkin’ Donuts, I’m pretty sure they actually run on credit and debt. And the truth is, Canada isn’t that far behind. Debt is not only culturally acceptable, but oftentimes the norm. Our governments borrow money in order to fulfill campaign promises and to fund various programs (legitimate and [arguably] otherwise), small business owners borrow money, and on a micro level, families borrow money for houses, cars, and things. It almost seems like some level of debt accumulation is inevitable.
Debt can be split into three categories, good, bad, and ugly debt.
Good debt would include any debt that is used to build long term equity. Securing a mortgage to purchase your home falls in under this category. So could financing a rental property. An education is certainly something that people invest in, oftentimes at a considerable expense, but as this debt is used to increase earning power, it’s a good debt.
Bad debt would include anything you purchase on credit, that doesn’t appreciate in value, or allow you to earn more money. Bad debt is when you spend money you don’t have on a credit card or line of credit, and choose to pay it off in instalments (sometimes at considerable interest).
Ugly or unforeseen debt is what I’m here to discuss, the debt that shows up when life throws you a curve ball. It’s the debt you aren’t prepared for. Regardless of how much good or bad debt you have accumulated, in order to have that debt in the first place, a lender somewhere has considered you a good credit risk. This means you make your payments, and you’re reliable. Perfect. But what happens when life happens and you aren’t able to make your payments?
Let’s say that you get in a car accident and can’t go to work, a family member falls ill and you are there to take care of them, you lose your job due to corporate downsizing, you take a risk with your own business and you fall short, what then? Ultimately, if you end up losing your ability to make timely payments on your debt, things can snowball really quickly, your good and bad debt become really ugly debt.
There is hope!
If you’re like most established Canadians, your house is your biggest asset. So if life does throw you a curveball, and you don’t qualify for a mortgage refinance to access some of your equity, this is where the CHIP reverse mortgage comes in. A CHIP Reverse Mortgage enables homeowners aged 55 and older to access their home equity without making any monthly repayments. So if you’ve got debt to pay off, not only can you consolidate it with a CHIP reverse mortgage, you aren’t required to make any payments.
My name is Sabeena Bubber and I’m a certified reverse mortgage specialist. Please call me anytime, Sabeena Bubber at 604-862- 8526 or visit myreversemortgage.ca for more information on how a CHIP reverse mortgage could work for you!