Quote:
Originally Posted by Mr.HappySilp
I woulnd't call downsizing exactly a good idea. Right now we rented out the basement for around $850 a month. if they were to downsize to say a duplex or a townhouse they won't be abel to rent out any parts of the house so no income in that sense. Not to mention with interest so low downsizing and getting cash seems a bad idea. As the old chinese always say is a must to be a roof under your head.
Real estate might go down but it will always come up (at least looking at the trend).
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Why wouldn't downsizing be a good idea? Your parents are into their 60's, semi retired, and from the sounds of it still trying to find ways to pay off their mortgage. I'm going to guess that without your's and your sister's contributions, and the basement rental, they would not be able to make the mortgage commitments. So are they living within their means?
With the threat of a housing market correction, your parents in their situation right now, can they afford to NOT cash out by downsizing? What happens if their property loses 15-20%, and they still have the same mortgage to take care of? If they downsize now they can free up cash (let's assume $300-500k) and get rid of their mortgage, the balance of which doesn't have to stay in a low interest bank saving's account which they, a low risk portfolio can return 5-7% with minimal risk. They can then live off this freed up cash until they can access their RRSP's. They will still have a roof over their head, regardless of whether its a duplex/townhome/condo/whatever. The downside is the loss of the rental income (which is declared and you are paying income tax on right?) that I'll assume is going towards the mortgage payment right now anyways, and you and your sister no longer have a roof over your head.
I'm not picking on your situation in particular, but it's a very tough situation when people are at or nearing retirement, haven't paid off their mortgage, and relying on their son/daughter/rental income to meet their financial obligations. Of course I'm generalizing based on the given information, your parents may have tons of money in their RRSP's which they are just waiting to be able to get at and what's going on right now isn't really all that relevant.