Created from a senior’s perspective, a CHIP Reverse Mortgage is a unique home equity borrowing opportunity for homeowners in Canada who are age 62 and older.
Senior homeowners can access up to $500,000 tax-free with no payments required on the loan until the home is sold or owners move out.
The amount available to the homeowners is based on the appraised value of the home, the age and gender of the homeowners, marital status, property type, and location. CHIP Reverse Mortgages are available in most areas across Canada, on most types of homes. Leaseholds, co-ops, manufactured homes and large rural acreages are not eligible.
The proceeds from the reverse mortgage are received as a cash lump sum. Homeowners are initially approved for a maximum sum, but may choose to receive a lesser amount initially and then request subsequent advances on the remaining available proceeds.
As part of a well-balanced financial plan, a CHIP Reverse Mortgage can add new flexibility to a senior’s finances and is an effective way to:
Create new and tax-efficient sources of income;
Preserve existing investments for continued growth and income generation opportunities;
Reduce personal income tax; Provide cash resources to fund a large project, purchase a vacation property, fund medical home care, start a new business or hobby, make cash gifts to children and grandchildren, and more.
Unique Protections and GuaranteesAlone among home equity borrowing options, the CHIP Reverse Mortgage offers these unique protections and guarantees:
No repayment is required while the homeowners continue living in the home.
The homeowners have complete freedom to sell or move at any time.
Homeowners will never be asked to move or sell to repay the loan.
As with other mortgages, up-to-date payment of property taxes, fire insurance, condominium/ maintenance fees, and maintenance of the property is required.
The loan amount to be repaid is guaranteed not to exceed the fair market value of the home at the time it is sold, protecting the balance of the senior’s estate.
Tax-savings OpportunitiesA CHIP Reverse Mortgage may also assist seniors in their tax-savings strategies. Proceeds from the reverse mortgage are received tax-free and are not added to taxable income. When the proceeds are used to purchase new investments, the interest expense of the loan may be used to offset tax on the new investment income and reduce the overall tax payable.
Terms of RepaymentBecause no payments are required on the reverse mortgage while the homeowners are living in their home, interest is added to the outstanding balance and is compounded semi-annually. The full amount only becomes due upon the death of the last surviving spouse, when the home is sold, or when the last surviving spouse moves out. The homeowner may leave the home for up to 12 months before the loan in considered payable, accommodating situations where a senior requires institutionalized medical/nursing home care for a short term.
All or a portion of the accrued interest may be paid once every calendar year, which can reduce the accumulation of interest on the outstanding balance and help preserve greater equity in the home.
The reverse mortgage may be repaid in full at any time. If payment is made within 36 months of the advance of funds, a pre-payment amount will apply. An interest rate differential payment may also be required. This will be waived if the reverse mortgage is repaid as a result of the death of the last surviving spouse or reduced if the reverse mortgage is repaid as a result of the long-term medical care institutionalization of the last surviving spouse.
A serious commitment to seniors.As Canada’s only national provider of reverse mortgages, CHIP’s commitment to seniors is at the core of the way the company does business. At every stage of their relationship with clients, CHIP ascertains that the senior is fully-informed and comfortable with the decision they are making. Seniors are encouraged to involve their family and their personal financial advisor. CHIP also requires the senior to seek an independent legal review of their contract. (CHIP offers a referral to a list of lawyers across Canada who have experience with reverse mortgages.)
If CHIP believes that a reverse mortgage is not in the best interests of a client, or that the senior is being pressured by outside influences, they will discuss that situation frankly and, if necessary, decline to proceed.
The CHIP Reverse Mortgage is available directly from CHIP by calling toll-free 1-800-563-2447 or by visiting the CHIP website. A do-it-yourself estimate is available on the CHIP website. Alternatively, seniors can request a CHIP Reverse Mortgage estimate through most of Canada’s major banks or with the assistance of their personal financial planner.