Wouldn’t it be nice to have money to do the things you love? Wouldn’t it be great to enjoy your Golden years with the freedom to pursue things you truly love like staying in your home for as long as you would like? Counting off your bucket list… Travel – either by taking cruises or vacationing somewhere warm and exotic.

Enter in a CHIP Reverse Mortgage!

For those of you who don’t what a Reverse Mortgage is, it’s basically a simple and sensible way to access the value of your home’s equity and turn it into cash. This way, you can enjoy retirement life on your terms. In other words, a Reverse Mortgage…

  • Pay off Debts
  • Handle unexpected expenses
  • Help children or grandchildren
  • Improve your day to day standard of living
  • Make special trip or purchase

A CHIP Reverse Mortgage, meanwhile, is a loan secured against the value of the home. It can easily be equated to a line of credit. With this mortgage loan, you do not make regular mortgage payments. As such, your mortgage loan balance increases because the monthly interest accrues. Now if you wish, you can make interest and principal payments monthly or just pay interest payments so that the mortgage balance would not increase.

Most borrowers pay the mortgage out when they decide to sell the home. As with all mortgages, there are conditions to a Reverse Mortgage. First off, the homeowner must keep the property in good condition. Second off, the homeowner must pay his or her property taxes and have the property insured. This way, all the money accessed through your CHIP Mortgage is tax-free.

An applicant must meet these main qualifications in order to qualify for this type of mortgage:

  • The homeowner must be Canadian and 55 years or older
  • The homeowner must reside in the home and the residency must be at least 6 months per year
  • At the time the reverse mortgage starts the equity cannot be exceeding than 55%

If the title of the property is registered to more than one person, then you must register as joint tenants, not tenants in common. The difference between these two types of shared ownership is what would happen to the property when one of the owners passes on. If the property is joint tenants, the interest of a deceased owner automatically transfers to the remaining surviving owner. If it is a tenant in common, the deceased tenant’s property interest belongs to his or her estate.

Although you do not need to have an income to qualify for the borrowed amount,  you will have to stay up to date on paying the property taxes, fire insurance, and condo fees (if applicable). The income you have coming in will have to be enough to adequately cover those associated fees.

How much can be borrowed?

There are factors that contribute to the total value. First off, your age is a determining factor for this mortgage product. Essentially, the older you are, the more you will qualify to borrow. The second factor is in direct relation to the details of your property. For instance, a detached home will qualify to borrow a higher amount than say a condo or townhome. The final factor to consider in this is the maximum amount that can be accessed through a CHIP Reverse Mortgage. In this case, the maximum amount is 55%. So, if your property is worth $1,000,000 and you are looking to qualify for the maximum amount, that would give you a mortgage of $550,000. If accessing a 55% Loan to Value is not high enough there are private lending options that will consider increasing the Loan to Value up to 65%.

One final note is to consider the costs associated with a CHIP Reverse Mortgage. Yes, there are no required payments due while you are living in your home. However, you should expect the following costs:

  1. You must appraise your property
  2. You must pay legal costs associated with the mortgage.
  3. All CHIP Reverse Mortgages application signers require independent legal advice. The lender deducts this from the mortgage proceed. This also does not have to be an out of pocket expense
  4. If you break the term of the mortgage, then mortgages penalties could be incurred:
  • 5% of the balance in the first year
  • 4% of the balance in the second year
  • 3% of the balance in the third year
  • 3 months’ penalty in the 4th year
  • No Penalty in the year of death regardless of the year
  • The penalty is reduced by 50% if you sell and move into a nursing home during the term

How do we repay your loan?

Your CHIP Mortgage remains for as long as you live in your home. When you decide to move or sell, the proceeds of the home sale repay your loan. The equity left over after repayment of the CHIP Mortgage is yours.

A CHIP Reverse Mortgage can be used as a retirement planning tool, which can be a great asset to someone who was frugal in their mortgage paying years and has built up enough equity to supplement their retirement income. In a time where banks are cutting back on lending to pensioners, this could be a great alternative.

If you are interested or want to learn more, contact a Sunlite Mortgage Broker today at www.sunlitemortgage.com or 1.877.385.6267 for more details.

 

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