Do You Need Time For Your Retirement Investments To Recover?
Erik Sepper • August 11, 2020
COVID-19 is wreaking havoc on retirement investments, particularly for those who rely on dividends as part of their income. Over the past decade, many older Canadians have taken a riskier approach with retirement investments because of low bond yields and interest rates caused by the financial crisis in 2008.
Instead of playing it safe, many retirees have turned to the stock market for better returns and dividend income. With global markets in a highly volatile state due to the pandemic, right now it is challenging to move investments to safer ground, and many companies have put dividend payments on hold.
If you need immediate cash to ride out the remainder of the pandemic, you may think you need to liquidate some investments. But what if there were other options that can provide the much-needed cash without taking investment losses? Consider borrowing from your home equity instead of liquidating investments prematurely. Here’s why this makes sense.
Take advantage of low interest rates
Uncertainty in the economy has caused the government to lower interest rates. Mortgage rates are at historic lows, and borrowing money at this point in time doesn’t cost a lot. By gaining access to your home equity through mortgage financing, you can somewhat bridge the gap. You can increase your cash flow until the markets, economy, and your investment portfolio recover.
Historically, stock markets have always recovered.
Bloomberg’s Canadian retirement expert Dale Jackson explains, “The S&P 500 lost half its value between October 2007 when the meltdown began and its March 2009 bottom. By October 2013, the S&P 500 topped its pre-meltdown high and has since doubled from there (pre-pandemic). It wasn’t until June 2014 that the TSX topped its pre-meltdown high. It has since rallied an additional 20 per cent (pre-pandemic).”
If the markets recovered both the Great Depression and Great Recession, there’s little reason to fear it won’t happen post-pandemic. The timing of the recovery, however, is uncertain.
Strategically tapping into home equity
You may be reluctant to use home equity to provide for living expenses until the post-pandemic economy recovers. And that is understandable. You worked hard to pay off your mortgage, why would you want a new one?
Well, if you’re faced with the choice of selling investments at a loss, or borrowing against your home equity to give yourself time to bridge the current cash flow gap and allow your investments to recover, it really becomes a matter of calculating the dollars and cents.
This is where expert financial planning comes in. You should be considering ALL your options, not just the ones we’ve been conditioned to consider over the years.
Unfortunately, there is no guidebook for navigating a global pandemic. However, there are options you can consider, now is a good time to consider them.
Reverse Mortgage
If you’re 55+ and occupying your home as your primary residence, you should seriously consider a reverse mortgage. It’s the ultimate mortgage deferral option.
You’ve likely seen commercial ads for reverse mortgages. And while some people think this is a risky way to access funds, if you intend to live in your home throughout your retirement years, it can be an inexpensive source of funds. Especially given our current low-rate environment.
One common misconception is that the bank owns your home if you get a reverse mortgage. This just simply isn’t true. A reverse mortgage is like any other mortgage, however, instead of making regular payments, the mortgage amount increases each year and is due when you choose to sell your house.
Other mortgage options
If you’ve got a steady pension income, you may be able to qualify for conventional mortgage financing. However, if you’re still paying off your first mortgage, you can apply for a second mortgage based on the remaining equity in your home.
It should be noted that a second mortgage is a high-risk option with significantly higher interest rates. If you’re cash-strapped already and are having trouble making payments on your first mortgage, there’s no benefit gained by adding a second payment.
Another option to consider is a Home Equity Line of Credit (HELOC), which operates much like a bank overdraft. It’s a pool of funds attached to your home that can be used when cash flow is low and paid back when cash flow improves. Interest rates are typically low because the line of credit is secured by your home equity. Further, interest is calculated based on actual borrowing not on the amount approved.
Avoid Fear-Based Decisions
Making fear-based investment decisions rarely work out. Because these are uncertain times, it’s important to consult with financial experts to discuss your options and allay your concerns.
Remember you’re not alone. Millions of Canadians are in similar circumstances. There are options. As part of a solid financial plan, using your home equity can provide funds that act as a bridge to avoid investment losses until the economy and market recover.
If you’d like to discuss your financial situation, contact me anytime for a free consultation. I would love to work through all your options with you!
Wondering If Now’s the Right Time to Buy a Home? Start With These Questions Instead. Whether you're looking to buy your first home, move into something bigger, downsize, or find that perfect place to retire, it’s normal to feel unsure—especially with all the noise in the news about the economy and the housing market. The truth is, even in the most stable times, predicting the “perfect” time to buy a home is incredibly hard. The market will always have its ups and downs, and the headlines will never give you the full story. So instead of trying to time the market, here’s a different approach: Focus on your personal readiness—because that’s what truly matters. Here are some key questions to reflect on that can help bring clarity: Would owning a home right now put me in a stronger financial position in the long run? Can I comfortably afford a mortgage while maintaining the lifestyle I want? Is my job or income stable enough to support a new home? Do I have enough saved for a down payment, closing costs, and a little buffer? How long do I plan to stay in the property? If I had to sell earlier than planned, would I be financially okay? Will buying a home now support my long-term goals? Am I ready because I want to buy, or because I feel pressure to act quickly? Am I hesitating because of market fears, or do I have legitimate concerns? These are personal questions, not market ones—and that’s the point. The economy might change tomorrow, but your answers today can guide you toward a decision that actually fits your life. Here’s How I Can Help Buying a home doesn’t have to be stressful when you have a plan and someone to guide you through it. If you want to explore your options, talk through your goals, or just get a better sense of what’s possible, I’m here to help. The best place to start? A mortgage pre-approval . It’s free, it doesn’t lock you into anything, and it gives you a clear picture of what you can afford—so you can move forward with confidence, whether that means buying now or waiting. You don’t have to figure this out alone. If you’re curious, let’s talk. Together, we can map out a homebuying plan that works for you.
Want a Better Credit Score? Here’s What Actually Works Your credit score plays a major role in your ability to qualify for a mortgage—and it directly affects the interest rates and products you’ll be offered. If your goal is to access the best mortgage options on the market, improving your credit is one of the smartest financial moves you can make. Here’s a breakdown of what truly matters—and what you can start doing today to build and maintain a strong credit profile. 1. Always Pay On Time Late payments are the fastest way to damage your credit score—and on-time payments are the most powerful way to boost it. When you borrow money, whether it’s a credit card, car loan, or mortgage, you agree to repay it on a schedule. If you stick to that agreement, lenders reward you with good credit. But if you fall behind, missed payments are reported to credit bureaus and your score takes a hit. A single missed payment over 30 days late can hurt your score. Missed payments beyond 120 days may go to collections—and collections stay on your report for up to six years . Quick tip: Lenders typically report missed payments only if they’re more than 30 days overdue. So if you miss a Friday payment and make it up on Monday, you're probably in the clear—but don't make it a habit. 2. Avoid Taking On Unnecessary Credit Once you have at least two active credit accounts (like a credit card and a car loan), it’s best to pause on applying for more—unless you truly need it. Every time a lender checks your credit, a “hard inquiry” appears on your report. Too many inquiries in a short time can bring your score down slightly. Better idea? If your current lender offers a credit limit increase , take it. Higher available credit (when used responsibly) actually improves your credit utilization ratio, which we’ll get into next. 3. Keep Credit Usage Low How much of your available credit you actually use—also known as credit utilization —is another major factor in your score. Here’s the sweet spot: Aim to use 15–25% of your limit if possible. Never exceed 60% , especially if you plan to apply for a mortgage soon. So, if your credit card limit is $5,000, try to keep your balance under $1,250—and pay it off in full each month. Maxing out your cards or carrying high balances (even if you make the minimum payment) can tank your score. 4. Monitor Your Credit Report About 1 in 5 credit reports contain errors. That’s not a small number—and even a minor mistake could cost you when it’s time to get approved for a mortgage. Check your report at least once a year (or sign up for a monitoring service). Look for: Incorrect balances Accounts you don’t recognize Missed payments you know were paid You can request reports directly from Equifax and TransUnion , Canada’s two national credit bureaus. If something looks off, dispute it right away. 5. Deal with Collections Fast If you spot an account in collections—don’t ignore it. Even small unpaid bills (a leftover phone bill, a missed utility payment) can drag down your score for years. Reach out to the creditor or collection agency and arrange payment as quickly as possible . Once settled, ask for written confirmation and ensure it’s updated on your credit report. 6. Use Your Credit—Don’t Just Hold It Credit cards won’t help your score if you’re not using them. Inactive cards may not report consistently to the credit bureaus—or worse, may be closed due to inactivity. Use your cards at least once every three months. Many people put routine expenses like groceries or gas on their cards and pay them off right away. It’s a simple way to show regular, responsible use. In Summary: Improving your credit score isn’t complicated, but it does take consistency: Pay everything on time Keep balances low Limit new credit applications Monitor your report and handle issues quickly Use your credit regularly Following these principles will steadily increase your creditworthiness—and bring you closer to qualifying for the best mortgage rates available. Ready to review your credit in more detail or start prepping for a mortgage? I’m here to help—reach out anytime!
Starting from Scratch: How to Build Credit the Smart Way If you're just beginning your personal finance journey and wondering how to build credit from the ground up, you're not alone. Many people find themselves stuck in the classic credit paradox: you need credit to build a credit history, but you can’t get credit without already having one. So, how do you break in? Let’s walk through the basics—step by step. Credit Building Isn’t Instant—Start Now First, understand this: building good credit is a marathon, not a sprint. For those planning to apply for a mortgage in the future, lenders typically want to see at least two active credit accounts (credit cards, personal loans, or lines of credit), each with a limit of $2,500 or more , and reporting positively for at least two years . If that sounds like a lot—it is. But everyone has to start somewhere, and the best time to begin is now. Step 1: Start with a Secured Credit Card When you're new to credit, traditional lenders often say “no” simply because there’s nothing in your file. That’s where a secured credit card comes in. Here’s how it works: You provide a deposit—say, $1,000—and that becomes your credit limit. Use the card for everyday purchases (groceries, phone bill, streaming services). Pay the balance off in full each month. Your activity is reported to the credit bureaus, and after a few months of on-time payments, you begin to establish a credit score. ✅ Pro tip: Before you apply, ask if the lender reports to both Equifax and TransUnion . If they don’t, your credit-building efforts won’t be reflected where it counts. Step 2: Move Toward an Unsecured Trade Line Once you’ve got a few months of solid payment history, you can apply for an unsecured credit card or a small personal loan. A car loan could also serve as a second trade line. Again, make sure the account reports to both credit bureaus, and always pay on time. At this point, your focus should be consistency and patience. Avoid maxing out your credit, and keep your utilization under 30% of your available limit. What If You Need a Mortgage Before Your Credit Is Ready? If homeownership is on the horizon but your credit history isn’t quite there yet, don’t panic. You still have a few options. One path is to apply with a co-signer —someone with strong credit and income who is willing to share the responsibility. The mortgage will be based on their credit profile, but your name will also be on the loan, helping you build a record of mortgage payments. Ideally, when the term is up and your credit has matured, you can refinance and qualify on your own. Start with a Plan—Stick to It Building credit may take a couple of years, but it all starts with a plan—and the right guidance. Whether you're figuring out your first steps or getting mortgage-ready, we’re here to help. Need advice on credit, mortgage options, or how to get started? Let’s talk.