CHIP Reverse Mortgage

Are you wondering whether a CHIP reverse mortgage is right for you?

If you are like many other Canadians over the age of 55, your assets include the equity in your home and the money you’ve saved. There is also a good chance that your home’s value has significantly increased over the years and represents a good portion of your net worth. While having a home that has increased value is a positive thing, you typically can’t spend that value unless you sell. And that’s something many homeowners simply do not want to do. The other option is putting a mortgage on the property – but then you may have to qualify on an income that is now reduced and make regular monthly payments that your budget won’t allow.

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At the Mortgage Advisors, we can offer you a CHIP Reverse Mortgage, which can benefit Canadian senior homeowners without the sacrifices of other financial alternatives.

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What Is a CHIP Reverse Mortgage?

A CHIP reverse mortgage is a financial product that allows you to tap into your home’s equity, without any obligation to pay off the loan until you move or sell. What makes this program successful is that participants can only access up to 55% of the home’s value, ensuring you have access to the cash you want and the peace of mind you need. To benefit from a reverse mortgage, you won’t need to provide proof of income or information about your medical history. Instead, you will be able to access the equity in your own home, regardless of your current income or health.

How Does a Reverse Mortgage Work?

With the ability to structure a reverse mortgage your way, you get the money you need in precisely the way you want it. Whether you want to receive your money over time in monthly installments or in one lump sum, the choice is yours. Similarly, if at any time you would like to repay the principal and interest in full or switch to paying interest on an annual or monthly basis, you can do that too.

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Benefits of a CHIP Reverse Mortgage

CHIP reverse mortgages are becoming an increasingly popular option for many Canadians over 55 years of age, – and not without a reason. The benefits of reverse mortgages are plentiful, ranging from increased financial security to keeping your investments intact for longer.

Tap Into Your Home Equity

If you’ve owned your home for a few years, chances are, it has increased in value quite a bit. With a reverse mortgage, you can take advantage of this value increase, accessing up to 55% of your home’s equity and boosting your cash flow. In addition, you won’t have to make monthly mortgage payments, which will free up additional funds.

Stay in Your Home

Nine in ten Canadian seniors dream of remaining in their current home as they age. The good news is that a reverse mortgage can help you achieve this dream, allowing you to stay in your place as you age, – and even continue benefiting from future home price appreciation.

Maintain Home Ownership

We understand you have worked hard to become a homeowner and mortgage-free. With a reverse mortgage, you always maintain the ownership of your property and will never have to move or sell as a result of changing home value or income (remember, there are no payments required). 

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Meet Your Financial Needs

The funds you receive through a reverse mortgage can be used for any financial needs, with no restrictions or limitations. Whether you are looking to consolidate high-interest debt, cover medical expenses, or use the funds for your day-to-day living costs, a reverse mortgage may be the income solution you need.

A Tax-Free Income Supplement

Because a reverse mortgage is, in fact, a loan, your taxable income won’t be increased, keeping any monthly payments you receive under the reverse mortgage tax-free.

Keep Your Investments

Using your home equity to cover expenses means that your registered savings accounts can continue to grow for longer. Plus, because the cash received through a reverse mortgage will not be added to your taxable income, it will not affect your benefits like the Guaranteed Income Supplement (GIS) or Old Age Security (OAS).

Peace of Mind

A reverse mortgage provides peace of mind for children helping provide care for their aging parents who want to stay in their homes, or accessing cash for much-needed renovations or home maintenance and repair.

Eligibility for a CHIP Reverse Mortgage in Canada

If you are wondering who is eligible for a CHIP reverse mortgage in Canada, consider the following criteria:

The Age of the Homeowners on the Title

First and foremost, the program is designed for Canadian senior homeowners, aged 55 or over. While there is a minimum age requirement, there is no maximum limit. In fact, older applicants can access more money – up to 55% of the total value of the home.

The Value of the Home

The current appraised value of the home will be considered when determining the reverse mortgage amount you can qualify for. Any secured debt against the property must be paid off with the proceeds from the CHIP mortgage.

The Home Location and Type

The total loan amount may also vary depending on whether you live in a rural or urban location. Most property types are eligible for the CHIP reverse mortgage, including condo apartments, townhouse units, and single-family homes. Plus, you are required to live in your home as your principal residence for most of the year.

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Important Considerations and Potential Drawbacks

As with any other type of loan, CHIP reverse mortgages in Canada have a few drawbacks:

You Could Lose Your Home to Foreclosure

In order to qualify for a CHIP reverse mortgage, you must be able to afford other homeowner expenses, such as property taxes, homeowner insurance, and more. If you fail to meet these obligations during your reverse mortgage period, you could default on the loan and lose your home to foreclosure.

A Reverse Mortgage Is Not Free

While you won’t need to make monthly payments with a reverse mortgage, the loan isn’t free. Any reverse mortgage comes with fairly high interest rates, plus it often includes set-up or closing fees, along with early repayment penalties.

 

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A Reverse Mortgage Can Affect Your Inheritance

A reverse mortgage is designed to reduce the equity in your home over time, which means that your heirs could inherit less once you pass away. When you’re gone, they will be required to sell the home to pay the loan balance in full, which means that your generational wealth may be at risk.

There Is a Limit to How Much You Can Get

With a CHIP reverse mortgage in Canada, you can access up to 55% of the appraised value of your home, but you may qualify for much less. Various factors, including your age, the type, and the location of your home will determine the actual amount you can borrow.

Reverse Mortgages Are Complicated

Finally, reverse mortgages are complicated and come with a number of caveats to consider. You should never sign a financial contract unless you understand the terms and conditions really well. Get in touch with the Mortgage Advisors, and we will be happy to guide you through your CHIP reverse mortgage options or discuss other alternatives to consider.

Maintain control of your home and free up income with a reverse mortgage.

Call today to review your options.

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