30 Nov CHIP reverse mortgage for seniors
Envision this scenario: living in retirement should be easy and pleasant as you are enjoying some time to yourself after a lifetime of work. But is it really that easy? Whether you are retired or planning to retire soon, there are things to take into account that you probably did not consider while you were working: utility bills, insurance and daily expenses do not retire. They keep coming, and often times, more rapidly than pensions or interest income. Even when you own your home, making ends meet at the end of the month can be a challenge for seniors. That’s where a CHIP (Canadian Home Income Plan) reverse mortgage can help many Canadian seniors aged 55 and older.
So, what is a reverse mortgage?
Based on the above description, a reverse mortgage is a type of mortgage loan available in Canada that is designed for homeowners 55 years and older. It allows seniors to tap into the equity that they have accumulated in their home, which in most cases, is the largest single asset they have. In exchange for cash from the lender, the homeowner will give a mortgage to the lender for up to 40% of the home equity. In this case, a senior may borrow money without having to make any mortgage payments.
The payments to the homeowner are not considered taxable income. Provided property taxes are paid, the homeowner has the right to live in the home for life. If not repaid previously, the reverse mortgage will be repaid upon the sale of the property by the homeowner or upon the death of the said homeowner.
How can you qualify for a reverse mortgage?
In order to qualify for this type of mortgage, senior homeowners must use the residence as their primary home, they must maintain the property in good standing, stay up to date with insurance, continue to pay property tax and pay off any outstanding debts secured with the home with the proceeds from the CHIP Reverse Mortgage.
What are some advantages and disadvantages of reverse mortgages?
Similar to other types of mortgages, a reverse mortgage can have advantages and disadvantages. When it comes to advantages, the funds you receive are completely tax-free. In addition, you can use the money any way you choose; pay off bills, remodel the house, or take a much needed vacation. Lastly, there are no payments required! In addition, the income is tax free, so it will not affect other retirement benefits.
On the other hand, reverse mortgage interest rates are sometimes a few points higher than a normal mortgage. In addition, if the homeowners desire to leave their home to their heirs, a reverse mortgage will greatly reduce the equity in their home. However, in most cases, due to the limited amount that can be borrowed through a reverse mortgage, the heirs inheritance is still somewhat protected, even if diminished by the amount of the mortgage.
If you are interested in this type of mortgage, contact The Costa Group to find out how much you are approved for. We can discuss the pros and cons with you and assist you in determining if it is the right choice for you.