Reverse Mortgage Frequently Asked Questions
What is a Canadian Reverse Mortgage?
A reverse mortgage is a financial tool that provides Canadian seniors 55 and up with cash flow from the equity in their homes. In general, no payments are expected to be made on a reverse mortgage until the home is sold.
Am I eligible?
Are you a Canadian, 55 years or older, and do you own your own home in Canada (current mortgage must not exceed 50% of home value)? If so, then you are eligible. However, it’s still a good idea to speak to a CHIP representative and see if you qualify, since everyone’s situation is different. If you haven’t reached 55 years of age, you can still explore what CHIP has to offer, and start planning how to integrate CHIP into your retirement plan.
How much money do I qualify for?
The amount of money that you qualify for depends on your age and the value of your home. The older you are, the larger the percentage of equity you can withdraw, up to a maximum of 50% of your home’s value. The more valuable your home, the larger the total amount of money you will receive.
How much money can I leave to my family?
The money that you receive through CHIP is your money, taken from equity in your home – CHIP just gives you access to it. So, depending upon how much you qualify to receive, you can leave all the money to your family. Keep in mind, however, that if you move or otherwise leave your home, you will be required to pay back the full principal amount withdrawn using CHIP, plus accrued interest.
Will I need to get an appraisal on my home?
Yes, you will definitely need to get an appraisal on your home. The amount of money you qualify for through CHIP greatly depends on the value of your property, since it’s a percentage of how much your home is worth. An appraisal establishes this value. The appraisal is ordered by CHIP and is completed by a third party. You are responsible for paying for the appraisal.
What will it cost me?
There are a few costs associated with obtaining a CHIP reverse mortgage. First of all, there is an appraisal fee, which you are responsible for paying, which typically ranges from $175 to $400, depending upon your location. There are also costs associated with obtaining independent legal advice, which are usually between $300 and $600. Finally, there are other legal, closing and administrative costs. The administrative cost that CHIP charges is $1,495 ($1,995 for the Planned Advance if the initial advance is less than $20,000). This fee includes the title search, title insurance, and registration, and is deducted from the amount of funds you receive, so there is no need to pay for it out of pocket.
Is my home still mine?
Yes, your home is still yours. As with any other mortgage lender, CHIP is registered on title as a mortgage, but your home remains in your name.
Are there payments that I need to make?
No. The only time you need to make any payment is if you move or sell your home, and at that point, you are required to repay the principal loan amount in full (plus accrued interest).
What happens when I die/pass away or move out of my home?
Unless there are other arrangements that have been made to repay your CHIP loan, it is required that home is sold and the loan repaid.
Do I need to take the maximum amount of money I qualify for now?
No. You have different options for how you’d like to receive your money. You can take one lump sum, some now and some later, or even planned advances over time, so that you have a monthly cash flow. You could even receive a portion of your amount now as a lump sum, and the remainder as periodic advances.
What if my home depreciates instead of appreciating?
If your home depreciates, and the CHIP loan amount exceeds the value of your home, you will only be required to repay the value of your home, not above and beyond. Therefore, you won’t have to dip into any other investments you have to repay CHIP – your estate is safe.
Can I move, or do I have to stay in my home forever?
You are free to move whenever you please. The only requirement is that upon the sale of your home, you must repay your CHIP reverse mortgage in full (plus accrued interest).
Is there a prepayment penalty with CHIP?
If you surrender interest in your property by selling it or moving out within the first three years of having your Canadian Home Equity Plan (CHIP) reverse mortgage, there is an applicable penalty. The penalty will be calculated based on the amount of your reverse mortgage.
If three years have passed before you surrender interest in your property, no penalty will apply if you repay your reverse mortgage in full. Therefore, as of the 37th month of your reverse mortgage.