CHIP Reverse Mortgage Review

  • 4 min read

Provided by HomeEquity Bank, the CHIP Reverse Mortgage is a program aimed at homeowners 55+ years old who may require access to the equity within their house. Via the CHIP Plan, clients who meet the eligibility requirements can access the value of their home’s equity, without actually having to sell their house. The money is tax-free and does not affect the benefits that are received by the client (whether they be Old-Age Security or the Guaranteed Income Supplement). The CHIP program is perfect for those who might need access to funds or an increased cash flow, but don’t want to move or sell their house.

The money received from the CHIP Reverse Mortgage can be received in scheduled advances or one lump sum; this is entirely up to the client. Whether money is needed to renovate the house, to cover debt, to travel, or to give an early inheritance to children, no repayment of this money is needed until  clients move or sell their home.

With that said, there are some things to keep in mind. If a customer has an existing home equity line of credit or existing mortgage, money received from the reverse mortgage must be used to pay these existing home secured loans, first. Homeowner’s insurance and property taxes must be kept up to date, too. Once a decision is made for the client to move or sell their home, the reverse mortgage amount must be repaid from the funds made from selling the house. After the reverse mortgage loan is paid off, the money remaining belongs to the client or estate.

To qualify for the CHIP Reverse Mortgage program, an individual must be a Canadian homeowner, 55+ years old, and the home in question must be their primary residence. If a home is owned by two individuals, both must be 55+ to qualify, and both must be listed on the application. The application includes the appraised value of the home, the property type, its condition, location, and the exact age of the clients applying. Home equity is determined by subtracting any secured debts against the house from its appraised value. To be eligible for a reverse mortgage, a client’s home must be valued at a minimum of $150,000.

It is important to note that because no monthly repayments are needed until the client decides to sell the home, interest rates for a reverse mortgage are higher than a traditional mortgage. The balance of the loan therefore increases over time, but a client can pay off their reverse mortgage loan (plus accrued interest) at any time; however, a fee may be charged if it is paid off early.

Interest rates for a reverse mortgage are offered in variable and fixed terms. A variable interest rate will increase according to the Bank of Canada’s prime rate, while fixed-rate terms offer a pre-determined period for accrued interest (i.e., six-month, one-year, three-year, or five-year). While circumstances vary, the closing fee HomeEquity Bank charges through the CHIP plan is generally $1,795. Appraisal fees, where a property appraiser comes in to review the value of the home, and Independent Legal Advice fees, are also linked to a reverse mortgage.

Lastly, once a client has assessed the pros and cons of a reverse mortgage, the process to move forward is an easy one. Customers can go to the CHIP Reverse Mortgage website and estimate how much money they can gain access to via a variety of online tools: the home equity calculator,  the reverse mortgage and product selector calculator. By plugging in some information with these quick and user-friendly online tools, customers can get an estimate of the money available to them through a reverse mortgage.

CHIP Reverse Mortgage also offers a “Frequently Asked Questions” section on its website, and clients can request a free guide to review more information on the CHIP program. The website also provides a section called “Educational Resources” that provides added information on reverse mortgages, as well as retirement planning, lifestyle, and company news.

The CHIP Reverse Mortgage website offers a variety of ways that clients can reach out, including email, customer service toll-free and local lines, as well as a mailing address.

For more information, visit CHIP Reverse Mortgage.

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Christopher - BSc, MBA

With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.