Is a CHIP Reverse Mortgage Right For You? What You Need To Know
Categories: Commercial Mortgage , Debt Consolidation , First Time Home Buyer Mortgage , Home Construction Loans , Mortgage Broker , Mortgage Calculator , Mortgage Companies , Mortgage Refinancing , Mortgage Renewal , New Construction Mortgage , Spousal Buyouts
The mortgage market is flooded with dozens and dozens of products, each with their own set of pros and cons.
It’s actually rather daunting to sift through them all - which deal is right for you? Am I missing out on something better?
One of the most popular mortgage products on the market is the CHIP Reverse Mortgage. A CHIP Reverse Mortgage is a loan that’s created specifically for senior citizens, of 55 years or older.
This means that if you’re on the younger side of 55, you will simply be denied access to this product. CHIP Reverse Mortgages are a great way for senior homeowners to access some of the equity built up in their home.
How Do CHIP Reverse Mortgages Work?
At a basic level, a CHIP Reverse Mortgage works in the way you’d expect. It’s a mortgage, but reversed. This means that you will receive a lump-sum of cash, rather than borrowing from the lender.
The amount of money you will receive is determined by the value of your home, and how much of your mortgage you have left to pay. The difference between these two values is the equity in your home.
So the less money you have left to pay off and the more valuable your home, the more money you will receive.
When you receive this money, you won’t have to leave the property, either. You will still keep ownership of the home and won’t have to sell it or move away. You can carry on living there as normal.
Additionally, the money you receive is 100 percent tax-free, and you won’t have to make any repayments on the loan. You can receive your money either as one big lump sum, or as regular payments over time.
This means that you can use your equity as another regular source of income. Want weekly payments? Want monthly payments? Want is all in one go? The options are incredibly flexible.
And once you have the money, it’s yours. Yours to do whatever you please! You could go on holiday, improve your home, invest it or save for a comfortable retirement.
How Do I Apply For A CHIP Reverse Mortgage?
As with any kind of mortgage deal, you must contact your mortgage broker for more information. They’ll be able to guide you through the process, and will help you complete the reverse mortgage.
Before you consider applying, make sure you meet the following criteria:
- You are 55 years of age or older.
- You’re a Canadian homeowner, and have paid off a good chunk of your mortgage.
- Your property is in good shape, and all your property taxes are up to date.
Once you’ve decided to go for it, you’ll have initial meetings with your broker to discuss your product options. As soon as you’ve opted to go ahead with the process, you will have a home appraisal scheduled. A home appraisal is a rough estimate of your home’s value.
Once this value has been determined, you will be told how much money you are eligible for. This is based on numerous factors, including property location, condition and type (house, condo).
Once you’ve confirmed you are happy with that amount, your broker will work with you to finalize the application process. When the funds become available, you are free to begin using them - tax-free!
What Are The Advantages Of A CHIP Reverse Mortgage?
We’ve previously discussed some of the merits of a CHIP Reverse Mortgage, but here are your bite size benefits:
- You can continue living in your home, without having to move on or sell it. Accessing the cash will not affect your home ownership.
- Every last bit of the money you receive is free of tax.
- There are no regular payments you have to make on the loan.
- There is more than one way to access your cash. You can choose to receive it all in one lump sum, or opt for regular payments. This means that a CHIP Reverse Mortgage can double as a regular source of income. Alternatively, you can combine these options.
Additionally, your CHIP Reverse Mortgage will not affect any other senior benefits you may be receiving. Your life will carry on as normal, and the only thing that will change is how much cash you have!
What Else Do I Need To Know About The CHIP Reverse Mortgage?
While for the most part, a CHIP Reverse Mortgage is free from caveats, there are a couple of things for you to bear in mind before making your decision.
The first is that you will be subject to several fees in order to complete the reverse mortgage process. These include:
- A home appraisal fee. This is the fee that’s paid to have someone come and value your home.
- Legal fees. It’s recommended that you seek independent legal advice to help you through the reverse mortgage process. This can prove pricey.
- If you decide to sell your house or move out after getting a CHIP Reverse Mortgage, you must pay a repayment fee.
Your mortgage broker will discuss these fees with you, including any others that may arise. As long as you’re aware of them beforehand, there will be no surprises!
Secondly, upon your death, there will be less money for you to leave to your children, grandchildren and heirs. This is because you’ve already accessed a good chunk of the value of your estate. If you wish to leave behind a large sum of cash, consider this carefully!
But, this in mind, you don’t have to take every last drop of cash that you can. For example, you could opt for 20 percent of the money that’s offered to you, or 30 percent. This way, you still receive a lump sum but have more assets to leave behind.
This All Sounds Great! Where Do I Sign?
Good stuff! To apply for a CHIP Reverse Mortgage or to learn more about them, simply get in touch with your mortgage broker today. This will allow you to begin the process quickly!