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22 Sep

Is a CHIP Mortgage Right For You?


Posted by: Darick Battaglia

Are you or someone you know above the age of 55 and having trouble making ends meet? Are funds needed to cover the costs associated with an illness, disability or life event? Perhaps it’s time for a home repair or renovation, such as a kitchen or bathroom. Pay for the kids education? Do you have a mortgage and can’t afford the payments anymore?

Perhaps the funds are just not available and you don’t have enough income to qualify for a mortgage but you have lots of equity in your home, or it might even be paid off.

Here’s where the CHIP program, also known as a “Reverse Mortgage”, becomes the solution. Yes, I’ve seen the commercials on TV and have heard the myths and negative “energy” around it. However, let’s first discuss what this mortgage can do.

  • Borrow up to 50% of the value of the home and make NO PAYMENTS as long as you live in the home. The interest payments are added to the mortgage loan amount and are only due when you vacate.
  • The amount that you are eligible to borrow is determined by your age and the location of your home, therefore, the younger you are the less you can borrow, eliminating the risk of eroding all your equity over time.
  • You maintain full ownership of the home.
  • Your only obligation is to keep the home in good condition, keep the property taxes and home insurance up to date.
  • You will never owe more than the value of the home.
  • You do not need to qualify for the loan.
  • 99% of the time, equity is realized upon sale.

There are many myths out there about reverse mortgages, here are some –

1. The most common myth is that you will lose all your equity in your home. Untrue! You will be provided with a schedule showing you how the equity in your home is expected to grow over time using 3 possible growth scenarios. Figures that are used are conservative, therefore, you could realize even more equity when the home is sold by yourself or your estate.

The amount of remaining equity depends on how old you were when you obtained the mortgage and how long you’ve had the loan when you leave the home. Plus, the value of the home at the end of the loan.

2. If I die, my spouse will be left with a big mortgage to pay off. This is not true as the loan is not due until you or your spouse leave the home.

3. It is costly to set up this mortgage. Set up fees include a property appraisal, legal and admin fees; usually a few thousand dollars or less. The mortgage can be used to pay the fees. This is not much different than a high risk mortgage. Remember NO payments!

It’s important to understand that there is a growing senior population and people are living longer. Employment pensions are disappearing, government pension payments are small. CHIP offers an affordable solution for seniors who want to spend their retirement in a comfortable, stress-free way.

For more info, contact your Dominion Lending Centres mortgage specialist, we have the details and will only consider this option for you when it is in your best interest.

Courtesy of Anne Martin, AMP – Neighbourhood DLC