The Truth About A Reverse Mortgage In Canada
- The Inside Facts On CHIP And Other Options
Get all the facts you need about reverse mortgages to make an educated and informed decision if they are right for you.
Don't take out a reverse mortgage in Canada until you've read our free guidebook to learn about all the options.
Learn the most important secrets, exactly how it works, the best alternatives and the main advantages and disadvantages - you won't find this information anywhere else.
This free guide will give you the real facts.
Written by a Chartered Accountant - who won awards in both 2017 and 2018 because of this free guide.
Learn The Truth And The REAL Facts
There is a lot of bad information out there about reverse mortgages - that's why we created our free guidebook to clear up everything you need to know.
Get The Real Pros And Cons
In addition to this, you'll learn:
1. All the positives and negatives - including any pitfalls.
2. How a reverse mortgage compares to a Home Equity Line Of Credit (HELOC).
3. All the facts that you must be aware of that nobody else is telling you.
- Erich S, Ontario
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What Is A Reverse Mortgage?
A reverse mortgage is a specialist home loan only available to people in Canada over the age of 55. It is called this because - unlike other mortgages - it doesn't require regular monthly payments. The key features:
- You must be over 55 years old to qualify.
- No monthly payments are required.
- The maximum amount you can borrow is 55% of the value of your home.
- Interest is charged but added to the amount owed, instead of being paid.
It is specifically for seniors - or those getting closer to retirement - hence the age restriction.
Canada vs USA - Beware
Please note that the above information relates to a reverse mortgage in Canada. For example, the age to qualify for a reverse mortgage in the USA is actually 62. This is why our free guide is a must read, as many people get confused between the Canada and U.S. reverse mortgage - the two products are very different.
If you have been reading any information that references the age as 62, or uses terms such as 'HUD', 'HECM', 'FHA' or 'churning' - then you have been reading information that relates to a reverse mortgage in the U.S.A - none of these terms have anything to do with Canada. See our free article on Canada vs the USA for more information.
You can also see the definition on the Government of Canada website or download our free reverse mortgage guidebook below to learn more about how it works in Canada.
What About An RBC Reverse Mortgage Or Other Lenders?
At present, the "Big 5" Canadian banks - RBC, BMO, CIBC, Scotiabank and TD do not offer a reverse mortgage.
It is only offered by two leners: Home Equity Bank - with their CHIP reverse mortgage (official website - is www.chip.ca) who are a regulated and Schedule I chartered bank in Canada - as well as Equitable Bank (official website is www.equitablebank.ca) with their Equitable PATH Home Plan Reverse Mortgage - which was launched in January 2018.
Manulife also have a product that can work in a similar way to a reverse mortgage - please contact us if you are interested in learning more about this.
What About Interest Rates?
For more on this and where the current reverse mortgage rates lie, check out our reverse mortgage rates article.
A Quick Video Explanation
In just 2 minutes, our video will explain the basics of a reverse mortgage to you - you can then download our free guide - once you're done - to get a full perspective.
Other Frequently Asked Questions
Click on the question to reveal the answer.
You can still take this out if you have a mortgage on your property. It would be the exact same process that you'd go through in taking your mortgage to another lender - they will simply replace your existing loan (essentially moving it to another lender). You'd then get to keep any excess money available. Check out this article on the top misconceptions for more like this: read our article on the top 8 misconceptions.
CHIP stands for the Canadian Home Income Plan (CHIP) - which was previously what this product was called. The name was changed to the CHIP reverse mortgage to more accurately reflect the type of loan this is (it is a mortgage, after all).
For more on the history of HomEquity Bank and the reverse mortgage product, the 400 year history of the reverse mortgage.
Equitable bank also recently launched their own reverse mortgage in January 2018 - theirs is very similar to the CHIP product.
There are 3 key factors in deciding how much you qualify for under a reverse mortgage: (1) Your property value, (2) Your age and (3) The property type. You may qualify for as much as 55% - that is the maximum available in Canada for a reverse mortgage.
For all the advantages and disadvantages of a reverse mortgage, I suggest you check out our free article on the reverse mortgage pros and cons. It outlines everything you need to know.
I am a licensed mortgage agent with Dominion Lending Centres Edge Financial - FSCO License #10710. I am also a certified Chartered Accountant. In 2017 I was also named one of the top Mortgage Professionals in Canada (under 35) by Canadian Mortgage Professional magazine largely because of my work on the reverse mortgage product.
Our mortgage brokerage is independently owned and operated - this means that you get independent, objective and professional advice on all of your financial needs. We don't work for any bank or lender - you are our client. I personally created this website- Reverse Mortgage Pros - so that it could a hub and provide all the information and advice that anyone would ever need.
We are also affiliated with Dominion Lending Centres - the number one company in Canada for any kind of mortgage loan, not just a reverse mortgage and registered with the Better Business Bureau.
Just so you have it in black and white: our guide, our free 90 second reverse mortgage assessment and all the advice and recommendations we provide you regarding a reverse mortgage are completely free - you will never pay us a penny ever for any of our reverse mortgage advice.
If you are interested in the costs and fees of a reverse mortgage, check out our article on reverse mortgage in Canada - costs and fees.
The free guide is a PDF file (opens with Adobe or any PDF or eBook reader). I will email it to you immediately. I will also continue to send you other free tips, tricks and advice to help you make your decision with regards to a reverse mortgage - you can unsubscribe any time if the free guide is more than enough for your needs.
We have written an article examining the alternatives to a reverse mortgage in more detail.
Whilst a reverse mortgage is much easier to get than any other kind of home loan, since we are still talking about lending large amounts of money, this does not make it a walk in the park. Both the companies that offer this - Home Equity Bank and Equitable Bank - are Schedule I banks (the highest level in Canada - the same as RBC, BMO, CIBC, Scotiabank and TD) - so they do require some paperwork. For more on the requirements, please get in touch with us.
If you have any further questions then please let me know! I hope you found some value from this.
- Michael (Mich) Sneddon CPA, CA
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Last updated: 17th April 2019