• Richard Earles

Understanding Reverse Mortgages


HomeEquity Bank is the only bank in Canada that currently offers the CHIP Reverse Mortgage as well as a secondary product, Income Advantage. These two products are options for homeowners unlike anything else out there. Instead of borrowing money to purchase a house, they will lend you money if you already have purchased one (as long as you qualify).


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Recently I finished a half-day seminar where I was educated on the different HomeEquity Bank offers through the CHIP Reverse mortgage and their Income Advantage products. Below I would like to share with you some of the key benefits and summarize the different ways you can potentially use these products.

CHIP Reverse Mortgage

  • Loan-to-Value: 55% maximum (dependent on property and applicant age)

  • Mortgage Amount: Min. $25,000 initial advance. Min. $10,000 for subsequent advance

  • Terms: 6 month fixed, 1-yr fixed, 3-yr fixed, 5-yr fixed

  • 5-yr variable rate

  • Amortization: None

  • Payments: No regular monthly payments required

  • Debt Servicing: None required (Just max. 55% LTV)

  • Credit Bureau: None

Now obviously there are other items such as appraisals, property taxes that need to be paid regularly, document requirements, and prepayment privileges as well as fess. However, the information listed shows you the vast differences between a traditional mortgage and a CHIP reverse mortgages.


If an applicant is over the age of 55, lives in their own home as well as owns it (at least the majority), and their property meets all the age and locations requirements, they can apply to have access to this product. Refinance, home improvements, in home medical care, gifting money to child or grand-child, supplemental income, all of these things can be achieved with a CHIP Reverse Mortgage.


Income Advantage

  • Loan-to-Value: 40% maximum (dependent on property and applicant age)

  • Mortgage Amount: Planned advances from $500/month or $1,500 a quarter

  • Min. $10,000 for subsequent advance

  • Terms: Planned advance: 5-yr variable rate

  • Lump-sum: 5-yr fixed, 3-yr fixed, 1-yr fixed, variable rate

  • Amortization: None

  • Payments: No regular monthly payments required

  • Debt Servicing: None required (Just max. 55% LTV)

  • Credit Bureau: None

The Income Advantage program is a lot like the CHIP Reverse Mortgage program, however, the Income Advantage is geared more towards people who want a stream of income they can rely upon every month. You can still do lump-sum advances but the main difference is it allows you to set-up planned advances.


Using HomeEquity bank can be extremely advantageous for a lot of people in Metro Vancouver. It allows people to access the cash in their home without being burdened by any lack of financial income and it can allow people to help their children or grandchildren by advancing the money and gifting it to them for their own home purchase.


When it comes down to it all, there are really two main things these two products do. One, is it allows for an income stream based on the home you live in and age, regardless of employment or credit history. Two, it allows parents or guardians to provide money from the equity in their home now, to the beneficiaries who would one day in the future be recipients if included in an estate will- an advance on an inheritance.


There are many things to consider with HomeEquity’s CHIP Reverse Mortgage and Income Advantage Program, if you or someone you know may benefit from secondary or primary income, support for medical expenses, home renovations, travel, or wanting to help family members with their financial needs, please do not hesitate to contact a Dominion Lending Centres Mortgage Broker.


Author: Ryan Oake - DLC Producers West Financial


PART 2

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Eliminate mortgage payment – Retired, or wanting to retire, but still have a mortgage and mortgage payment to make? Use a reverse mortgage to pay off the traditional mortgage, getting rid of that monthly payment.


Unexpected expenses – Home repairs, helping children, vehicle repairs, health care/home care, etc. A reverse mortgage gives you access to your tax-free equity whenever you need it. The equity can be used to pay for those expenses without the burden of adding a new monthly payment into your life.


Helping family – Home values have risen, and often the plan is to leave the house to children or grandchildren as an inheritance. A reverse mortgage is a way to access some of that inheritance money today, gift the money now and enjoy it with them as the family benefit much earlier in life.


Purchasing a new home – Some clients are moving to that just right, final home, but finding they cost more than anticipated. A reverse mortgage can be used to buy a new home, allowing clients to afford a much higher priced home, or keep more cash on hand.


Aging parents needing home care – As we age, sometimes a little additional help is needed to stay in the home. Instead of selling and moving to a care home or assisted living, some clients prefer to stay in the house and have in home care. A reverse mortgage is a terrific way to access the equity in the home, month by month, to pay for those care costs.


Tax free retirement funding – By using the home as part of the financial plan, clients can preserve investments, pay less tax, and often have a greater net worth in the end.


If you or a family member would like to learn more about reverse mortgages, contact a Dominion Lending Centres mortgage professional near you.


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Author: Michael Hallett - DLC Producers West Financial

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