You may be seeing and hearing a lot more about the CHIP Reverse Mortgage today and wondering if it’s actually a good solution for yourself or older family members. The concept of a reverse mortgage has been around in Canada for a long time and has become even more relevant given our aging population. Here is some information for you or your older family members to consider.
Who are reverse mortgages best suited for?
People age 55+ that own a house, townhouse, or condo and want to either increase their cash flow, or access equity without making a monthly payment.
CHIP became HomEquity Bank in 2009 so they are actually a federally regulated Bank governed by the same regulator that governs all the Banks in Canada.
They are the leading provider of reverse mortgages in Canada. We work directly with HomEquity Bank so you get local, professional face to face service.
They are fairly conservative in how much they lend and it’s based on age and property so while 55% of the value is the most they will lend, not all clients receive this much. The older the client the higher the approved limit will be.
Their average client still has over 50% equity still remaining in the home when they eventually sell.
They offer a fair market value guarantee which means you will never owe more than the fair market value of the home at the time it is sold.
Instead of having to take all the money at once like a standard mortgage they give you a credit limit on your home so you can access the funds as needed with interest only being charged on the money you’ve advanced.
You never have to make any payments at all, neither interest or principal, for as long as you live in the home. The interest simply accrues and is paid back to HomEquity Bank when you move/sell.
Given that they are lending a fairly small percentage of the home value, history has shown that a conservative house appreciation rate of just 2.5%-3%/year will make up for the accruing interest leaving clients with plenty of equity in the end.
Funds are tax free and clients are allowed to pay up to 10%/year against the total loan if they like.
You aren’t approved primarily on your income, which is what limits so many from getting traditional mortgages and lines of credit. Approvals are based mainly on age and equity.
Eliminate mortgage payment – If you are retired or wanting to retire but still have a mortgage and mortgage payment to make you can use a reverse mortgage to pay off the traditional mortgage getting rid of that monthly payment.
Unexpected expenses – home repairs, helping children, vehicle, health care/home care, etc. A reverse mortgage gives you access to your tax free equity whenever you need it to pay for those expenses without the burden of adding a new monthly payment into your life and without having to cash in investments.
Helping family – Home values have risen and often times the plan is to leave the house to children or grandchildren as an inheritance. A reverse mortgage is a way to access some of that inheritance money today. Gift it now and see your family benefit much earlier in life. Perhaps help them buy a home given how expensive homes are now, take the family on a trip, help with schooling, pay off some debts, etc.
Purchasing a new home – Some clients are moving to another home but find it costs more than anticipated. A reverse mortgage can be used to buy a new home allowing clients to afford a much higher priced home or keep more cash on hand.
Aging parents needing home care – As we age, sometimes a little additional help is needed to stay in the home. Instead of selling and moving to a care home or assisted living, some clients prefer to stay in the house and have in home care. A Reverse mortgage is a great way to access the equity in the home, month by month, to pay for those care costs.
Tax free retirement funding – By using the home as part of the financial plan, clients can preserve investments, pay less tax, and often have a greater net worth in the end.
We work directly with HomEquity Bank to get you all the information you need to make the right decision on a reverse mortgage. If you decide to proceed, we will walk you through the entire process with assistance from our local HomEquity Bank representative as needed.
If you need more information regarding mortgages or if you need any advice on your personal situation please contact our office at 604-556-3893 or email at [email protected]
For more information on our mortgage products and your preferred Abbotsford Mortgage Broker please visit our website at www.ymscanada.ca.
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