5 Dec

CHIP Reverse Mortgages


Posted by: Jenni MacDonald

You may have heard about a Reverse Mortgage product called “CHIP”.  There is a lot of misinformation about this great mortgage product because of some reverse mortgage schemes in the United States.

Let me answer some questions about the benefits of the CHIP product offered exclusively through HomEquity Bank.

How much can you get and when can I apply?

Once all owners are over the age of 55, you can apply for a CHIP mortgage.  You must have at least 55% of the value of the property available.  The funds are tax-free!


What is a reverse mortgage and how does it work?

A CHIP is a loan secured against the value of your home.  Unlike a traditional Home Equity Line of Credit (HELOC) or a second mortgage, you are not required to make monthly mortgage payments for as long as you live in your home. You always maintain ownership and control of your home.  The mortgage payments can be added back into the mortgage. The full amount of principal and interest is payable when the home is sold or the homeowner(s) die.


Can your estate owe more than your home?

A CHIP mortgage cannot seek any further compensation from the borrower – even if the property does not fully cover the full value of the loan upon payout of the mortgage. Basically, when the last homeowner dies (and the reverse mortgage is due), the estate will never be responsible for paying back more than the fair market value of the home. The estate is fully protected – this is not the case for almost any other mortgage loan.


Why get a reverse mortgage?

Here are some examples of how clients commonly use it:

  • eliminate debt payments
  • help a child or grandchild with a down payment on a home
  • purchase a new home (right-sizing instead of having to downsize the home)
  • increase cash flow to improve lifestyle (e.g. vacation, new car)
  • pay healthcare costs so you can stay in your home
  • pay for an unexpected expense (e.g. home repairs)
  • save on taxes by taking out a CHIP mortgage at the beginning of your retirement
  • take monthly draws to improve monthly cash flow

For more information on the CHIP Mortgage, please give me a call.