A CHIP Home Income Plan is a reverse mortgage secured by the equity in your home. Unlike a traditional mortgage in which you make regular payments to someone else, a reverse mortgage pays you.
The big advantage with CHIP is that you do not have to make any payments – principal or interest – for as long as you or your spouse live in your home. That’s what has made reverse mortgages such a popular solution in Canada, the U.K., the U.S., Australia and other countries.
A CHIP Home Income Plan is designed exclusively for homeowners age 55 and older. This age qualification applies to both you and your spouse.
You can receive up to 50% of the value of your home. The specific amount is based on your age and that of your spouse, the location and type of home you have, and your home’s current appraised value.
You can choose how you want to receive the money. CHIP gives you the option of receiving all the money you’re eligible for in one lump sum advance, or you can take some now and more later, or you can receive planned advances over a set period of time. You can even combine a lump sum advance at the beginning with ongoing advances over time.
Canadian Reverse Mortgage Facts
1. You and your spouse (if you are married) must both be at least 55 years old or older.
2. The amount of loan that you get varies depending on your age, the house value and the location of your home. The minimum loan is $20,000. The maximum loan is $750,000.
3. Eligible amounts are determined through an independent appraisal of the property. Costs associated in obtaining a Canadian Reverse Mortgage may be paid from mortgage proceeds at time funding. This means you would not be required to pay for the closing costs of the reverse mortgage out-of-pocket.
4. You can get pre-approved for the maximum amount initially, and only have a small amount advanced. If you require more funds at a later date, simply call to receive those funds.You only pay interest on the amount that is loaned to you … not the amount that you get approved for.
5. All money that you receive for a Canadian Reverse Mortgage is tax-free.
6. Canadian reverse mortgages do NOT affect any Old Age Security or Guaranteed Income Supplement government benefits you may already be receiving.
7. You make absolutely NO monthly repayments while you or your spouse live in your home. Other mortgage products require you to make a monthly payment. With a Canadian Reverse Mortgage you do not have to make any mortgage payments.
8. You still get to keep the house in your name; you are still on title (just like you would with any other mortgage). When you sell the home the debt is paid through the proceeds of the sale…however you even have the option to ‘transfer’ your reverse mortgage to a new property.
9. You keep all the equity that is left in your home. 99% of all homeowners have equity in their home when the reverse mortgage loan is repaid. In fact, on average over 50% of the house value is still equity by the time that the Canadian Reverse Mortgage is repaid. In the event of the passing of the borrower, when the reverse mortgage must be repaid the heirs of the estate can obtain a standard mortgage on the property to pay out the reverse mortgage at that time.
10. Your estate is well protected. The lender guarantees that you or your heirs will never owe more that the home value.
11. Save on Taxes! You can use a Canadian Reverse Mortgage to take cash out of the home and put it into investments. All the interest charged on the loan is then tax deductible
Reverse Mortgage in Canada Misconceptions
Myths and Facts of a Reverse Mortgage in Canada
Myth: The lender owns your home.
Fact: You remain the owner of your home. All you are required to do is pay your property taxes and any other maintenance fees required as well as maintain your property and be sure to have proper fire insurance.
Myth: You will have to pay taxes on the money you get from the Canadian Home Income Plan or any reverse mortgage in Canada.
Fact: In Canada the money that you receive from the Canadian Home Income Plan or any reverse mortgage in Canada does not qualify as taxable income and will not affect any government benefits that you currently receive including the Old Age Security and Guaranteed Income Supplement.
Myth: If I have poor credit I won’t qualify for a reverse mortgage in Canada or Canadian Home Income Plan.
Fact: In order to qualify for a reverse mortgage in Canada you do not need to have good credit. The only requirement is that you and your spouse are 55 years of age or older.
Myth: The fees and closing costs for a reverse mortgage in Canada are very high.
Fact: The fees to register a Home Income Plan reverse mortgage are much the same as any other mortgage product. There is the appraisal fee and the fee for your independent legal advice. Appraisals can range from $175 to $400 and the legal advice typically costs $300 to $600 depending on who you hire. Other fees that are incurred are for the conveyance, closing and administrative costs which total $1,495 and are deducted directly from your Home Income Plan funds and therefore are not out-of-pocket.
Myth: I can be forced out of my home.
Fact: You can remain in your home for as long as you like. You will not be required to pay back the loan unless you or your spouse sell your home, move out or both pass away.
Myth: I can end up owing more than my home is worth.
Fact: It is guaranteed that the total amount owing will never exceed the fair market value of your house at the time of sale.
Myth: If I pass away the bank will own my home and my heirs will be left with nothing.
Fact: Your heirs will not be required to sell the house after you pass away and will have the option to pay back the Canadian Home Income Plan reverse mortgage and keep your home if they choose.
Myth: There are restrictions on what you can and can’t use the money for.
Fact: You can use the money for what ever purpose you choose whether it be a new roof on your home, gifts for your grandchildren or a special trip for you and your loved ones!
Canadian Home Income Plan FAQs
Is there an age limit for a reverse mortgage in Canada?
Yes, you and your spouse must be at least 55 years old in order to qualify for the Home Income Plan or reverse mortgage in Canada.
Is there a monthly payment for the Canadian Home Income Plan?
No, you can have a Canadian Home Income Plan (Reverse Mortgage) for as long as you wish and never make a payment on that mortgage as long as you or your spouse lives in the home.
Is there a maximum amount I can borrow?
Yes, Depending on your age and the condition of the house you can borrow on average up to 40% of the value of your home.
What if the loan eventually exceeds the value of the equity in my home?
No matter what, that the loan balance will not exceed the fair market value of the home. In other words you can never owe the lender more than the value of the home.
What if I have bad credit? Will I still qualify for a Canadian Home Income Plan or reverse mortgage in Canada?
Yes, if you are the right age and your house is in reasonable shape then you will qualify for a Canadian Home Income Plan (reverse mortgage in Canada).
Is it only available in monthly payments?
No, you can receive the money in one lump sum or as a supplemental income every month.
Do I have to pay taxes on the money I receive?
No, it does not qualify as taxable income.
Are there restrictions on how I use the money?
No, you can use it for any purpose.
What are the out-of-pocket costs?
You will need to pay an appraisal fee that can range from $175 to $400.
Mortgage agent ; Fsco License : M 10001638 for Ontario Region.
Mortgage Alliance Company of Canada. Lic # 10530
Corporate Office, 2005 Sheppard Avenue E, Suite 200,
Toronto, On. M2J 5B4
Tel 647 891 2367
Toll Free : 1 – 877 – 366 – 3487