What is a Reverse Mortgage?
The evolution of the Reverse Mortgage program only bodes well for what it is today. Basically, a reverse mortgage is an equity take-out of your current home value that is payable, at the home owners discretion, either after the home is sold or as you wish at anytime in between. The flexibility of never having to make monthly payments is why a reverse mortgage is so attractive and enjoyed by thousands of Canadians. Take a look below at the details to answer all your questions about eligibility, amount and costs associated with this mortgage program. Incidentally, this mortgage is with a Canadian Bank governed accordingly…now that’s confidence you can be comfortable with!
Details about the CHIP (Canadian Home Income Plan)
- What is a Reverse Mortgage?
- Ownership protection
- Estate protection
- Interest rates and Set-up costs
- Available to homeowners 55 (New Youthful Age just announced June 2011) and older on their principal residence.
- Location and type of home must qualify.
- No medical, income or credit qualifications.
- Homeowners can access up to 40% of the current appraised value of their home based on the homeowner’s age and that of their spouse, and on the location and type of home.
- Funds are not taxed as income.
- Funds can be received in a lump sum or over time. Most clients take a lump sum.
- Any outstanding loans secured by the home must be retired with the CHIP Home Income Plan funds.
- No regular payments are required.
- The full amount only becomes due when the home is sold, or if both homeowners move out.
- Clients have the option to repay the principal and interest in full at any time.
- Upon repayment, an interest rate differential may apply. A prepayment amount will apply on repayments within the first three years. This may be waived or reduced in the event of death or a move into a long-term care facility or retirement residence.
- With a CHIP reverse mortgage, title remains in the homeowner’s name and they will never be asked to move or sell to repay their Home Income Plan.
- The homeowner is responsible for up-to-date payment of property taxes, fire insurance and condominium/maintenance fees, and maintenance of the property.
- In more than 20 years of our experience, over 99% of homeowners have equity remaining upon repayment.
- The amount to be repaid is guaranteed not to exceed the fair market value of the home at the time it is sold, protecting the homeowner or the estate.
Home Equity Preservations with the use of $100K over 15 years
In this illustration, home equity appreciates by 5.10% annually (Source: CREA, Canadian Real Estate Association, 15-year national house appreciation average, September 2009) with a CHIP Home Income Plan initial interest rate of 3.75%. These assumptions are not indicative of future market performance or interest rates. Actual results may vary.
Interest rates and Set-up costs
- Clients may choose a fixed rate with a variety of terms, or a variable rate.
- Interest is added to the outstanding balance and is compounded semi-annually.
- Interest rate discounts are available that significantly lower the cost of borrowing.
- Set-up costs include a home appraisal, independent legal advice and legal & closing costs.
Annual Percentage Rate (APR) *
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* Annual Percentage Rate (APR) is based on a CHIP Home Income Plan of $150,000 and calculated as the rate of interest for the length of the plan plus closing costs. Rates are subject to change and will be posted on this site.