A reverse mortgage is a mortgage loan that is available to a homeowner over the age of 55 years and is secured against the available equity in your home.
Reverse mortgages tend to be payment-free in the sense that the borrower never has to make any monthly payment towards the repayment of the principal loan amount. The homeowner will continue to live and stay in the home as long as they would like to live there. The reverse mortgage only becomes due if the borrower moves out of the home or sells the home. At that point, the principal amount plus all of the interest accrued since the mortgage loan was funded becomes due. This amount can never exceed the fair market value of the home and can be deducted from the proceeds of the sale of the home or can be repaid by refinancing the home or with another form of lump sum payment.
The only regular payment that the borrower will be required to make during the term of their reverse mortgage are keeping the property tax paid up to date, and the home and fire insurance. These policy payments might be on a monthly basis or not on a monthly basis depending on the policy of the municipality and homeowner insurance agreement for the specific policy. But never any month to month mortgage payments on their reverse mortgage. If they have any secondary financing behind their reverse mortgage, then they might be required to make payments each month for that 2nd mortgage.
Essentially a reverse mortgage is a home equity loan that has no monthly payment. Not having a monthly payment to make towards the mortgage can be a tremendous advantage to many borrowers. Think of what your life could be like without monthly mortgage payments affecting your cashflow.
Like most home equity loans, reverse mortgages provide tax-free cash proceeds to the borrowers on the date of closing that can be used for whatever the customer desires. Whether it’s to maintain their lifestyle and cover monthly expenses during retirement, help other family members such as your children and grandchildren build their wealth or pay for their education and other expenses, pay-off debt, travel the world, renovate your home, buy a new car, or pay for medical bills, give an early inheritance to someone you love, a reverse mortgage can be a great way to make your dreams come true.
There are only a few banks in Ontario and other parts of Canada that currently offer reverse mortgages including Home Equity Bank (HEB Bank) and Equitable Bank (EQ Bank). In order to qualify, the customer borrowing the funds must own a home in Canada and be 55 years of age or older. If the homeowner is married, both spouses must be at least 55 years of age.
A CHIP Mortgage is a reverse mortgage that is offered through Home Equity Bank to any homeowner who is 55 years of age or older.
Since Home Equity Bank is one of the largest and most well-known providers of reverse mortgages in Ontario, a CHIP mortgage is often synonymous with a reverse mortgage. Just like the reverse mortgage loan, a CHIP mortgage carries no monthly payment and is only required to be paid-off once the customer is no longer living at the home address or when they have sold their home or estate. Even though this is a reverse mortgage product the qualifying criteria, interest rate, and the terms and conditions that go along with a CHIP mortgage from Home Equity Bank could differ from the terms, rates, and qualification conditions and factors associated with a reverse mortgage from other lenders such as Equitable Bank.
A Seniors Mortgage is another term for a reverse mortgage that comes with no monthly payment and is offered to a homeowner who is at least 55 years old.
Unlike the regularly most commonly accepted age for seniors being 65 years or greater, for reverse mortgage purposes, a senior is anyone aged 55 years or older. Keep in mind that the older you are, the greater loan-to-value you can qualify for when you apply for a reverse mortgage. It’s important to note that even though often times, a seniors mortgage is used to carry the costs of retirement, that is not always the case and these mortgages are used for a multitude of purposes. Its benefits can be plentiful.
A CHIP reverse mortgage in Ontario can be pretty simple for seniors to apply and qualify for. Although the CHIP reverse mortgage is specifically offered through Home Equity Bank to seniors, it is not a new concept and other lenders such as Equitable Bank have caught on to its appeal. As a result, lenders such as EQ Bank now offer similar reverse mortgage options to you based on their specific qualification policy and criteria.
For the purposes of a seniors mortgage, a senior is considered anyone who is 55 years of age or older.
The lender will review the following criteria to determine if the you would qualify for a reverse mortgage loan that does not come with any monthly mortgage payment obligations, and if so, what amount and loan to value you can qualify for:
Based on the information above, the lender will determine firstly if you qualify for a new reverse mortgage or CHIP reverse mortgage, and secondly what percentage of the value of your home can you withdraw in the form of a reverse mortgage. Depending on which lender you choose and their policy regarding the amortization of loans, you may qualify for more of a loan or less of a CHIP mortgage in Ontario based on the individual lender’s sliding scale.
Your age and the appraised value of your home will play a big role in how much equity your will be able to withdraw through a reverse mortgage. The higher your age, the higher the maximum allowed loan to value will be. The lower your age, the lower the maximum allowed loan-to-value will be. Using the appraised value of your home, the higher the current market value is the higher the amount will be based on the loan to value.
For example, let’s say that you are 55 years old and are approved for a loan-to-value of up to 30%. Let’s compare the scenario when your home in Toronto, Ontario, Canada is worth $500,000 vs your home being worth $800,000.
Home value: $500,000
Maximum LTV: 30%
Maximum reverse mortgage amount = 500,000 x 0.3
Maximum reverse mortgage amount = $150,000
Now let’s look at that scenario with a home worth $800,000
Home value: $800,000
Maximum LTV: 30%
Maximum reverse mortgage amount = 800,000 x 0.3
Maximum reverse mortgage amount = $240,000
Now let’s say those same homes are inhabited by someone who is 75 years of age and qualifies for the full 55% maximum LTV available on a reverse mortgage. Here’s how those scenarios will play out.
Home value: $500,000
Maximum LTV: 55%
Maximum reverse mortgage amount = 500,000 x 0.55
Maximum reverse mortgage amount = $275,000
Now let’s look at that scenario with a home worth $800,000
Home value: $800,000
Maximum LTV: 55%
Maximum reverse mortgage amount = 800,000 x 0.55
Maximum reverse mortgage amount = $440,000
Think of all of the things you can do with the extra money from the equity you pull out of your home! Depending on the lender of your reverse mortgage, you may even be allowed to add a second mortgage behind your reverse mortgage or CHIP mortgage in Ontario. Also keep in mind that different lenders will have different criteria and stipulations when it comes to allowing secondary financing behind their first position reverse mortgage loan.
Firstly, you must apply for a reverse mortgage or CHIP mortgage. Then, once you get approved you will be given the proceeds in cash and can then use the cash from the proceeds for anything at all. The choice is yours!
Although interest will be calculated and added to the principal repayment amount, you will not be required to make any monthly interest or principal payment. That’s right, you will not need have you pay it off month by month. Instead, the lender will recoup their initial investment along with interest that is added over time once you either sell your home, or when you no longer are living in it as your principal residence. This will allow you to keep more cashflow in your pocket each month.
When it comes to paying back a CHIP reverse mortgage, or any kind of reverse mortgage, you are not required to make any regular monthly payment. You only need to pay back your loan and the interest that comes with it upon moving out of your home or when you decide to sell it. In the event of death, the estate will be responsible to repay the reverse mortgage. Once the home is sold, then the principal and interest will be due to be paid back by the borrower. In the event of the borrower’s passing, the estate would be responsible for paying back the loan and interest.
You should be aware of the rights that you have as the borrower should you wish to pay back your reverse mortgage early. There may be some fees associated with it. You can also refinance your reverse mortgage or get a new mortgage as you age and become eligible to higher loan amounts based on increased loan to value and/or the increase of value of your home. Your mortgage broker has the right tools that can help you plan for these steps ahead of time.
To get the best reverse mortgage rates in Ontario, you must understand the different types of reverse mortgage products that are offered by the few different reverse mortgage lenders who offer reverse mortgages.
The chart below showcases some of the popular reverse mortgage options offered by Home Equity Bank and by Equitable Bank. In the case of Equitable Bank, you will notice that they offer two distinct forms of reverse mortgages. The first one is their Flex Rate Reverse Mortgage which allows you to borrow against the equity that you have available in your home and collect the cash through a combination of a lump sum of money at the onset of the mortgage, followed by either ad hoc as-needed advances and/or pre-scheduled advances for future financial planning needs. They also offer a lump sum advance option that is similar to the CHIP reverse mortgage that provides you with only one lump sum at the beginning of your mortgage term. CHIP reverse mortgages can be great tools to help you achieve the financial goals you’ve been waiting for.
|Lender and Product||CHIP Reverse Mortgage||Equitable Bank Reverse Mortgage Flex Rate||Equitable Bank Reverse Mortgage (Lump-Sum) Rate||Closing and Administrative Costs**********|
|1 Year Term Starting Rate||3.99%*||3.89%****||3.79%*******||$1,795-$5,000|
|2 Year Term Starting Rate||4.65%**||4.39%*****||3.99%********||$1,795-$5,000|
|3 Year Term Starting Rate||5.15%***||4.89%******||4.29%*********||$1,795-$5,000|
As you can see in the table above, the interest rates on a CHIP reverse mortgage start from 3.99% (4.69% APR) for a 1-year term all the way up to 5.15% (5.41% APR) for a 3 year term as of the date that this page was published in July of 2021. At this time, there is also a 5-year term for a CHIP Reverse Mortgage that starts at 5.49% (5.76% APR). It is important to keep in mind that these are the starting rates and the rate that you may qualify can be higher depending on a number of factors.
In addition to the CHIP Reverse Mortgage provided by Home Equity Bank (HEB), you can see that Equitable Bank has 2 great alternatives to HEB’s CHIP Mortgage with rates starting as low as 3.79% (4.61% APR) for a 1-year Reverse Mortgage Lump Sum product to as high as 4.89% (4.99% APR) for a 3-year term with their Reverse Mortgage Flex Rate product. Again, these are the starting rates as of July 2021 and can be higher depending on timing and other qualifying criteria.
One of the advantages of CHIP Mortgages is that it is usually easier to apply and qualify for a CHIP Mortgage than it is for a traditional new mortgage refinance. In addition to this, there are many other advantages to getting a CHIP Reverse Mortgage. Here are a few:
With so many benefits to the borrowing customer, it’s easy to see why the CHIP reverse mortgage continues to be a popular choice for a homeowner aged 55 or older. Also, the older you are, the more equity you can withdraw from your home with the CHIP plan. With up to 55% loan to value, a CHIP mortgage can be a great option for you. The LTV that you can qualify for depends on your age and a variety of other factors that your mortgage broker can use an online reverse mortgage calculator to help you determine how much you can qualify for.
Although CHIP mortgages come with an array of benefits, you also need to consider any potential risks that we will look at down below. Contact your mortgage broker by phone or email to see if getting a CHIP mortgage is the best solution for your needs or if there may be even better options available to you. A good mortgage broker has the right calculator and all the tools needed to help guide you in the right direction.
Despite all of the good apparent advantages that come along with it it’s important that you are informed about the potential drawbacks of CHIP mortgages. One of the disadvantages of a CHIP mortgage is the fact that since there are no monthly payments to be made on the mortgage, the interest can add up over the years.
Here are a few other common disadvantages and drawbacks that can come along with a CHIP reverse mortgage:
Basically, although you or your next of kin will never have to pay back more than the home is worth, provided property tax payments and homeowners insurance policy is maintained, there may not be any money or equity left over in the event of a sale of the home. This will of course depend on a variety of factors including the fair market value of the home once a sale occurs, the length of time and amount of interest that has accumulated, the conditions of the real estate properties, and more.
These are all factors that should be considered when deciding if a CHIP mortgage plan is right for you. Again, we recommend working with a knowledgeable mortgage broker who will use all of the tools at their disposal to help you understand your available options and make the best decision for your financial and personal needs and situation.
A good reverse mortgage, similar to a CHIP mortgage, carries good benefits that fall within the same range. One of the other popular options for reverse mortgages in Ontario is offered by Equitable Bank (EQ Bank). Benefits of these other reverse mortgages include the following:
If you have available cash that is reserved for future purposes, but you need more cash now, a reverse mortgage can help with you access the extra money from your home.
An example of the downside to a reverse mortgage is that the interest rates offered by reverse mortgage lenders tend to be higher than the interest rates offered by banks for more traditional home refinancing loans.
Another potential downside is that the balance owing on the reverse mortgage grows with each passing year. Since there are no monthly payments made to this mortgage, the interest keeps growing every year.
It’s important to know the pros and cons, along with some of your rights when entering into a reverse mortgage, so here is a comparison chart comparing some of the pros and cons of CHIP reverse mortgages (also known as CHIP refinance mortgages):
|• You never have to make any mortgage payments. Just stay up to date on your property taxes and homeowners insurance policy.||• Interest rates tend to be higher than rates on traditional bank mortgages.|
|• Receive the funds in cash tax-free against the built up equity available in your property.||• Little to no equity or money might be left over after the sale of the property due to accumulating and compounded interest.|
|• Use the money for anything you’d like. Reverse mortgages can be great tools to provide real financial help you live your best retirement life!||• You must repay the entire loan plus all interest once the home is either sold or once the customer no longer lives in the home.|
|• Many seniors use reverse mortgage as tools to pay off debt, buy a vacation property, have extra real cash during retirement, buy a car, buy a boat, travel the world, help your family, and more!||• Certain conditions must be met by the borrowers in order to qualify for a reverse mortgage loan or seniors mortgage loan.|
|• Stay in your family home for as long as you’d like.||• A full credit bureau check is required for all reverse mortgage products at the moment.|
|• Only pay it back once you move out or sell the home or are no longer able to physically stay in your home.||• Additional lender fees, legal fees, and brokerage fees may apply. Speak with your mortgage broker to understand what, if any, additional fees might apply to your reverser mortgage.|
|• Amount due cannot exceed the fair market value of the home.|
|• Often times it is easier to apply and qualify for a reverse mortgage than it is for a traditional new mortgage or mortgage refinance through a bank.|
|• There is plenty of information available online for you to read about reverse mortgages to help you be better prepared.|
|• Since many of the reverse mortgage lenders pay mortgage brokerages a finders fee, in many cases you will not incur an additional brokerage fee, although this will vary brokerage by brokerage as brokers are allowed to still charge a broker fee if they feel the time invested into brokering your reverser mortgage warrants a fee, or if the lender does not pay a finders fee to the broker.|
|• Use the funds from your reverse mortgage to help manage your wealth or the wealth of your family|
|• Pay for the education of your children and grandchildren|
|• Give your kids or grandkids an early inheritance|
|• Purchase a vacation home down south, a second home, or a cottage to enjoy|
|• Purchase investments, investment properties for yourself or your family|
|• Use the funds to pay for your homecare needs and healthcare needs|
|• Help you children and grandchildren begin to build or add to their wealth|
Working with the right mortgage broker makes it easy to apply for a reverse mortgage. At Clover Mortgage we understand that the needs of Canadian seniors who enjoy home ownership and other homeowners 55 years of age or older vary. We make it our mission to thoroughly analyze and understand your current needs and future goals to help make your retirement dreams and the dreams of your family come true. Whether you are looking to pay off any other debt without selling your home, have extra cash to fund your retirement and have a sense of financial security, to access cash to purchase new luxury items and live the high-life, or help other family members who you love with their needs, we will help you plan for success.
By ensuring that you understand both the benefits and potential downside to getting a reverse mortgage through Equitable Bank or another good seniors mortgage lender, or a CHIP mortgage from Home Equity Bank, you can be assured that you are making the right financial decision for your future and the future of your family. With the right Reverse Mortgage solution, we can even help you achieve some of the dreams you had reserved for your retirement earlier than expected.
If we determine that a new CHIP mortgage or reverse mortgage is not the right option for you, we will help you apply for a more suitable mortgage that better suits your needs and works for your situation. Clover Mortgage has the right tools and knowledgeable team to help you with your financial and home ownership needs.
We have access to over 40 different mortgage lenders and access to multiple reverse mortgage lenders. So even if a reverse mortgage is not right for you, we can help you determine what mortgage solution works best for your needs.
The Clover Mortgage advantage is knowing that you have a complete team of experienced and knowledgeable professional licensed mortgage brokers, mortgage underwriters, and administrative staff working for you. Our team is here to ensure that every detail of the reverse mortgage process is presented to you in order to help you make the best possible choice for your individual financial needs and personal retirement goals. We care about you and your family and are here to help.
Because we care about you, our goal is to help make it easy for you to apply and to receive an approval for the right mortgage. We will help guide you and provide you with the right advice so that you can make the right decision. With the help of a Clover Mortgage broker, you can get an answer for all of your questions and rest easy knowing that you are choosing the right mortgage for you. We will help answer and address all of your mortgage related questions.
With interest rates still at record lows, 2021 might be the best time to get a CHIP reverse mortgage. Not only are the interest rates still low at the banks, but because reverse mortgage lenders need to keep their products competitive, both CHIP mortgages and other reverse mortgages are priced quite low. If you own your family home in Ontario, and are a senior or are at least 55 years old, you might find that now is the best time to get a reverse mortgage in Ontario.
As economists predict upticks in interest rates over the next year or so due to an economic recovery, there may be no better time than now (2021) to look at getting yourself into a reverse mortgage or a CHIP reverse mortgage in Ontario to help make your retirement more enjoyable. As a senior you have the advantage that other homeowners do not. You have access to a no-monthly-payment seniors’ mortgage. The mortgage brokers here at Clover Mortgage are specialists when it comes to helping homeowners to receive approvals for their reverse mortgage or home refinancing application.
No need to wait in line at the bank, call or email us today to learn more and see how much you can qualify with a reverse mortgage! Our mortgage agents are standing by to take your call or reply to your email request. You can also connect with us on Facebook to get up to the minute mortgage and real estate news and tips.
No, you can’t lose your house with a reverse mortgage. As long as you keep paying your property taxes and the policy for the homeowners’ insurance, you can keep your house for as long as you live in it or until you decide to sell it. Only then will your reverse mortgage principal along with the accumulated interest come due.
Yes, a 70 year old person can get a mortgage, a home refinance loan, or a new reverse mortgage or CHIP mortgage provided they meet the qualification requirements. Age can sometimes be a factor, and a qualified mortgage broker can help you better understand your mortgage options as a senior living in Canada. With the right guidance and planning, you may be able to find a suitable mortgage solution in your 70’s that works for you. It all comes down to resources and planning, which the right mortgage agent can help you with.
Yes, there are many great mortgage loans for seniors. In fact, the CHIP Reverse Mortgage is just one of these seniors mortgage options. Standard mortgages such as bank mortgages, mortgage refinances, private mortgages, are also options that are available to senior citizens. Regardless of your age, speak with a mortgage broker at Clover Mortgage today to learn about the different mortgage options that are available to you and your family. For the most part, a reverse mortgage and the interest associated with it does not need to be paid off until the borrower either moves out of the home, passes away, or the home has been sold. If you do not plan on selling your home and wish to pay off your reverser mortgage loan, you can. Although you may choose to repay sooner and not wait until your home is sold, or until you are no longer residing in it, keep in mind that you may have to pay penalties in some situations. Some mortgages allow for a penalty-free payoff if the home is sold. It is advisable to have a good mortgage broker review your reverse mortgage agreement and suggest a fitting strategy for you.
Yes, a 65 year old can still get a mortgage that is amortized over 30 years. Although it is more difficult and depends on a number of factors including the specific mortgage lender and their policy, the borrower’s income, credit history once a credit check is conducted, property type and location, there are several mortgage lenders who offer 30-year mortgage amortizations for homeowners over the age of 65 years. It becomes even easier if you have a co-signer or several co-signers who can apply with you and be added to your application who is younger than 65 years old and who can help maintain the mortgage for a period of 30 years or more. An experienced mortgage broker will analyze your circumstance and help you determine which mortgage lender to apply with to maximize your chances of getting approved.
Although third mortgages are rare behind a second that is already behind a CHIP or reverse mortgage, depending on the reverse mortgage lender and the second mortgage lender, a third position mortgage loan might be an option on a case by case basis. Your mortgage broker may be the best person to ask about third mortgage options that go in third position when a CHIP mortgage is involved. They will help you process the proper application and ensure that your application is submitted to the lender that will be able to provide you with a fitting mortgage option.
The answer to this question depends on a number of things and varies on a case-by-case basis. Depending on the person’s financial situation, health situation, credit situation that the credit check reveals, and future life plans, filling out a mortgage application and buying a home as a senior can be a great option. Conversely, it can be the wrong choice if all of the factors are not properly considered and assessed. In some cases, it might be best for a senior to rent a home, however, if a senior chooses to buy a home, they might be able to submit an application and qualify for a no-payment CHIP Reverse Mortgage. That’s right, you and your family will not have to make any minimum monthly payments as long as you stay and live in the home. Speak with a mortgage broker to learn more about the reverse mortgage option.
Depending on how they plan to fund and spend their senior years, refinancing their mortgage can be a great option to help fund their retirement. With the many refinancing options available to them, seniors could use the funds from a mortgage refinance for a multitude of purposes. With a reverse mortgage, a senior and their family can refinance up to 55% of the current value of their home and have not monthly mortgage payments for the duration of their life living in the home. Only when they sell or no longer stay or live in the home as their primary residence would the loan and interest be due. Until then you can live without making another mortgage payment in your life.
Yes, seniors can receive approval for a mortgage for themselves and their family in Canada. Seniors are usually able to get a mortgage application approved and qualify for many of the products that other younger borrowers can qualify for. It really comes down to the details. Details such as who the specific mortgage lender is, along with such factors as income levels, credit scores, location of the home, style and type of property, and more. That’s right, a the lenders and brokers will have to check the borrower’s credit before granting the loan.
No, a CHIP Mortgage and a Reverser Mortgage cannot go in second or third position as it stands now in July of 2021. However, for the most part, both Home Equity Bank and EQ Bank allow a second mortgage behind their Reverser Mortgage loan. As for a third mortgage, it is not commonly accepted when a reverse mortgage or senior mortgage is in the picture. You must clearly state on the application any 2nd or 3rd financing that will be behind the CHIP mortgage or reverser mortgage at the day of closing. If you intend on getting a second mortgage after closing your reverse mortgage, then your reverse mortgage lender will need to be notified prior to the second mortgage funding, not after.
Yes, once you have sold your home or no longer live in it, the reverse mortgage loan and all of the interest becomes due. As long as you stay in your home and keep your property taxes and house insurance current you will not have to pay anything towards the principal or interest on your reverse mortgage, unless otherwise stated in the agreement.
No, you will not be required to pay your mortgage any month at all. Instead the only payments required, whether on a regular day each month or quarterly or annually or at any other interval frequency, would be your property taxes and home insurance payments. If you do that, then as long as you stay living in your home, you will not have to pay anything back towards your senior’s reverse mortgage.
There is not any online calculator available to help you figure that out because the calculation depends on a variety of factors. Your mortgage broker can act as your human calculator and one of your most informative resources, so we recommend that you reach out to them for help.
Sometimes you may notice that some of the issues on your credit bureau are not real and in fact mistakes. Your mortgage broker can help you rectify these mistakes so that it will not negatively affect your credit moving forward.
Yes, even while still working in your careers you can still get a reverse mortgage. As long as you are both at least 55 years old and have enough equity available in your home, then even if you and your spouse are still building your careers, you can still apply and qualify for a CHIP reverse mortgage provided that you meet the other qualification requirements. Careers or no careers, a senior’s reverse mortgage may still be a great option for helping with your finances in life.
If you read this page then you already have read through some great material that summarizes in detail about the pros, cons, and qualification requirements of a reverse mortgage. If you wish to find more information and additional resources, there are plenty of other websites and resources where you can read more about the topic. Otherwise, why read about it when you can email or call us to contact and speak with a licensed and knowledgeable Clover Mortgage broker to learn all you need to know about your mortgage options that we have available to you, and about reverse mortgages. We are here to answer all of your reverser mortgage questions.
To learn about your full rights, you and your mortgage broker should go over the entire mortgage commitment prior to you signing. The mortgage commitment will outline your main rights as a borrower when it comes to a number of matters such as early pre-payment options, terms, conditions, and more. The commitment is a great source to learn of your rights.
Yes, appraisals, site visits, or site inspections will be required prior to funding your reverse mortgage loan.
You can start by calling or emailing Clover Mortgage to contact and speak with a broker and start your application for a reverse mortgage.
Your privacy is kept in top priority. We only share the required information with the lender for the purposes of getting your loan request reviewed and approved. In order to protect your privacy further, prior to pulling your credit bureau report, we get your authorization.
No, it does not have to be your last mortgage. You can refinance your CHIP mortgage, add a second mortgage, pay it off and get another mortgage, or buy another property and get a mortgage on that. A reverse mortgage does not have to be the last mortgage you get in your lifetime, though it might be the last time you need a mortgage in the case that you have enough equity in your home to pull from to sustain yourself throughout your full retirement.
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