Reverse Mortgages in Canada: What’s the story

Bill Fraser • Oct 08, 2018

In an effort to draw awareness to the growing need for reverse mortgages in Canada, HomEquity Bank is releasing a series of articles about reverse mortgages in Canada to elaborate on how the product can benefit Canadian Seniors and clear up some common misconceptions. Here, to kick off this series of articles is our feature article on what is a CHIP Reverse Mortgage and what are the benefits?

Unlike our American neighbours, when Canadians explore the option of a reverse mortgage, there is only one provider, HomEquity Bank. In America, there are many companies who offer a reverse mortgage and as a consumer, on top of familiarizing yourself with the concept, you also have to research the best interest rates, read the fine print and compare them to a reverse mortgage provider that best caters to your situation.

In Canada, it is much easier since, HomEquity Bank, is the only provider of Reverse Mortgages. However, Canadians are encouraged to familiarize themselves with the concept of a reverse mortgage and understand how the product works in order to determine if it is the best option for their financial situation. One way to do this is to get a free estimate of how much money you can get with a CHIP Reverse Mortgage. This estimate is based on your profile and home condition. You can also find out some of the frequently asked questions about reverse mortgages in Canada.

To get you started in your understanding of a Reverse Mortgage in Canada , below is some basic information about the CHIP Reverse Mortgage.

What is CHIP?

CHIP is the name of HomEquity Banks’ reverse mortgage product. It is a loan secured against the value of your home. It allows you to unlock up to 55% of the value of your home without having to sell or move. The money you receive is tax-free and you can use it towards any of your personal needs such as:

  • Pay off debts/Consolidate debt
  • Home renovations and repairs
  • Unexpected expenses (medical, emergency)
  • Financially aid your children/grandchildren
  • Improve or maintain your standard of living
  • Pay for a vacation or a special purchase

Who is eligible for CHIP in Canada?

  • Canadian Homeowner (own your home)
  • Your home is your primary residence
  • Age 55 or older

Why CHIP (benefits)?

  • No Health Checks

There are loans that require a health check to ensure that the recipient(s) (of the loan) are in good health to pay off the loan. With a reverse mortgage, since there are no regular monthly payments required until the homeowner(s) move, sell or pass away, health checks are not a requirement.

  • Keep Your Home And Maintain Ownership Of Your Property

Many people often ask whether the property title of the home gets transferred to the bank once the reverse mortgage is approved. The bank simply loans you a percentage of the value of your home in tax-free cash, but the title and ownership of the property remains yours. However, this means you must continue to pay your property taxes and maintain your home so that it remains in good condition.

  • No Regular Monthly Payments Required

The biggest advantage and feature of a reverse mortgage in Canada, is that you don’t have to make any regular monthly payments until you move, sell your home or pass away. Unlike a regular mortgage, where you have to maintain your monthly payments, a reverse mortgage lets you use the money as you please and gives you freedom from payments for as long as you live in the home. Once the homeowners move, sell the home or pass away however, the reverse mortgage including interest and principal is paid off from the home’s sale proceeds.

  • The Money Borrowed Is Tax-Free And Does Not Affect Your OAS Or GIS

Since the income you receive from a reverse mortgage is tax-free, it does not have any impact on your Old-Age Security (OAS), Guaranteed Income Supplement (GIS) or income from your Registered Retirement Savings Plan (RRSP) that you may be receiving.

  • Choose How You Plan To Spend The Money

One of the greatest benefits of a reverse mortgage is that you are in complete control of the loan and you are free to spend it on whatever needs you require it for.

  • You Will Never Owe More Than The Value Of Your Home

With a reverse mortgage you will be guaranteed that when you or your estate has to repay the loan, it will never exceed the fair market value of your home at the time it is sold. But keep in mind that your property must be kept in good maintenance and your property taxes and insurance have to be up to date and not in default.

  • Relieve Financial Stress

A reverse mortgage loan can help you consolidate your debt and clear your monthly payments so that you can live the rest of your life financially stress free!

  • Enjoy Retirement

A reverse mortgage loan will help you clear your financial burdens and allow you to enjoy your retirement. You worked hard your entire life, now is the time to enjoy the fruits of your labour.

  • Take Control

A reverse mortgage loan is essentially the money from your home equity. So take control of what you own and make it work toward your needs now!

Reverse mortgages are definitely not for everyone, but they are a great option for many Canadian seniors who are looking for that extra financial security.

To find out more about a CHIP reverse mortgage in Canada, Contact HomEquity Bank at 1-866-522-2447 or talk to your financial advisor to see if a Canadian reverse mortgage is a good option for your financial needs.


This article is the property of HomEquity Bank and has been published with permission.

BILL FRASER
OWNER / MORTGAGE EXPERT

BOOK AN APPOINTMENT CONTACT ME
RECENT POSTS

RRSP As A Downpayment

By Bill Fraser • 14 May, 2024
Did you know there’s a program that allows you to use your RRSP to help come up with your downpayment to buy a home? It’s called the Home Buyer’s Plan (or HBP for short), and it’s made possible by the government of Canada. While the program is pretty straightforward, there are a few things you need to know. Your first home (with some exceptions) To qualify, you need to be buying your first home. However, when you look into the fine print, you find that technically, you must not have owned a home in the last four years or have lived in a house that your spouse owned in the previous four years. Another exception is for those with a disability or those helping someone with a disability. In this case, you can withdraw from an RRSP for a home purchase at any time. You have to pay back the RRSP You have 15 years to pay back the RRSP, and you start the second year after the withdrawal. While you won’t pay any tax on this particular withdrawal, it does come with some conditions. You’ll have to pay back the total amount you withdrew over 15 years. The CRA will send you an HBP Statement of Account every year to advise how much you owe the RRSP that year. Your repayments will not count as contributions as you’ve already received the tax break from those funds. Access to funds The funds you withdraw from the RRSP must have been there for at least 90 days. You can still technically withdraw the money from your RRSP and use it for your down-payment, but it won’t be tax-deductible and won’t be part of the HBP. You can access up to $35,000 individually or $70,00 per couple through the HBP. Please connect anytime if you’d like to know more about the HBP and how it could work for you as you plan your downpayment. It would be a pleasure to work with you.

Selling Your Property? Let's Talk

By Bill Fraser • 30 Apr, 2024
If you’ve been thinking about selling your existing property, for whatever reason, it would be in your best interest to connect with an independent mortgage professional before calling your real estate agent or listing it yourself. And while talking with your mortgage professional might not sound like the most logical place to start, here are a few scenarios that explain why it makes the most sense. If you’re buying a new property If you’re selling your property, chances are, you’ll have to move somewhere! So, if you plan on buying a new property using the equity from the sale of your existing property, chances are you’ll need a new mortgage. Don’t assume that just because you’ve secured mortgage financing before, that you’ll qualify again. Mortgage rules are constantly changing; make sure you have a pre-approval in place before you list your property. Also, by connecting with a mortgage professional first, you can look into your existing mortgage terms. You might be able to port your mortgage instead of getting a new one, which could save you some money. If you’re not buying a new property Even if you aren’t buying a new property and want to sell your existing property, it’s still a good idea to connect with a mortgage professional first, as we can look at the cost of breaking your mortgage together. Unless you have an open mortgage, or a line of credit, there will be a penalty to break your mortgage. The goal is to work on a plan to minimize your penalty. Because of how mortgage penalties work, sometimes it’s just a matter of waiting a few months to save thousands. You'll never know unless you take a look at the details. Marital breakdown The simple truth is that marriages break down. When that happens, often, people want closure, and unfortunately, they make decisions without really thinking them through or seeing the full picture. So, instead of simply selling the family home because that feels like the only option, please know that special programs exist that allow one party to buy out the former spouse. The key here is to have a legal separation agreement is in place. If you’d like to discuss the sale of your property and your plans for the future, connect anytime. It would be a pleasure to work with you!
More Posts
Share by: