A reverse mortgage allows you to access the equity in your home if you are 55 and over without having to worry about repaying your loan or interest until you sell or move. The CHIP Reverse Mortgage is provided by HomEquity Bank – who are the a federally regulated Canadian bank.
Key Features Of A Reverse Mortgage In Canada:
Before I get into the detail, make sure and download our free guidebook to learn what exactly a CHIP reverse mortgage is and how it works in Canada – get your copy here.
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You can receive up to 55% of the value of your home. The specific amount is determined by the current appraised value of the home, your age, the age of your spouse, and the location and type of home you own. In reality, you would probably have to be older than 75 years old to get the full 55%. At 55 years old, the amount you qualify for would usually be around 30% – sometimes more, sometimes less depending on the property location and type.
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Both you and your spouse – or anyone on title to the home (including ‘matrimonial homes’) – must be 55 and over to qualify for the mortgage. In addition to this, any existing mortgage on the house must be paid off using the funds. You can’t qualify for a reverse mortgage unless you are able to completely pay off this amount from the reverse mortgage funds.
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You can customize the mortgage – either as a lump sum or in regular monthly installments. This makes no impact on the product but many people like to have regular monthly payments deposited into their bank account.
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All the funds you receive are completely, 100%, totally tax free. The reason for this is that technically this is still a loan remember. So it is not counted towards your taxable income. Neither does it affect any benefits or any other Governmental funds you receive.
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One of the key benefits that most people look forward to is that no payments are ever required while you and your spouse live in your home. And you are able to live in your home for life, without worrying about it. The balance is only payable if you decide to sell and move or you pass away (in which case your Estate could pay it back by selling the house or your heirs re-mortgage it).
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You maintain ownership of your home. 100%. Never, ever, ever do you have to give up ownership of your home. It is written in black and white in the legal agreement. All that is required is you maintain your property and stay up-to-date with property taxes, fire insurance, and any condo or maintenance fees.
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You keep all of the equity remaining on your home. Since the CHIP Reverse Mortgage is capped at 55%, HomEquity Bank has found that 99 out of 100 people have money left over after the loan is paid. So – in this sense – it is a relatively low risk retirement fund. And in addition to this…
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The balance you owe – which grows over time due to the interest – can never exceed the fair market value of your home. So it is ‘capped’ in this sense. The reason the lender offers this guarantee is because they are so confident that your equity will be kept – as we mentioned above 99% of Canadians have equity remaining when the reverse mortgage is paid off. So you can rest assured that your estate is well protected.
What Other Features Do You Need To Know?
As noted above, a reverse mortgage is of course subject to interest – click here to see the latest rates –
which are quite low just now by historical standards – but rising.
It can also be used to help the kids buy a home – check out our article on this.
A Canadian Chartered Accountant and licensed Mortgage Professional – creator of Reverse Mortgage Pros – the #1 reverse mortgage specialists in Canada. I make it my mission to educate Canadians about how reverse mortgages work so that you can make an informed and educated decision that’s right for you and your family.
