You may already have a good sense of what a traditional mortgage involves: you take a loan for a property you’d like to purchase from a bank or other lending institution and agree to repay that loan at a certain interest rate over a predetermined time period. Over time, you accumulate equity in your property until the loan is paid off entirely.
Now, what about a reverse mortgage? Less commonly-known, a reverse mortgage is a loan secured against the value of your home. It allows you to access some of your home equity (in tax-free cash) without having to sell your home. With a reverse mortgage, you don't need to make monthly mortgage payments. The loan only becomes due when you decide to sell or leave the property.
In order to qualify for the CHIP Reverse Mortgage, issued by HomeEquity Bank across all Canadian provinces, you (and your spouse) must be at least 55 years old and the home must be your primary residence. There’s no minimum income requirement for a reverse mortgage.
The CHIP Reverse Mortgage can be approved for up to 55% of your property’s total value. Your exact loan amount is determined by several factors, which include:
If approved, proceeds from the reverse mortgage can be distributed to you from the provider in several ways or in a combination:
Instead of making monthly payments, you repay the balance of the loan plus interest when you sell, move out, or leave your property for any reason. You may also have the option to transfer the reverse mortgage to a different property if you move. If you wish to prepay the loan in advance, you may have to pay a penalty (similar to a conventional mortgage).
While the rising loan balance could eventually grow to exceed your property value, you (or your estate) will never be required to pay more than the value of your home.
If you meet the criteria for a reverse mortgage (i.e. homeowner over the age of 55) and need to improve your cash flow, you may want to consider the CHIP Reverse Mortgage. Some of the most common uses for reverse mortgages and their proceeds include (but are not limited to):
If you have a need similar to those mentioned above, and you meet the qualifying criteria, a reverse mortgage may be right for you.
You may also want to consider some of the primary benefits of a reverse mortgage, which include:
If you think a reverse mortgage may be right for you, check out the CHIP Reverse Mortgage from HomeEquity Bank. You can also check your free credit score in minutes and see the financial products available to you.
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