What is a Reverse Mortgage? – Ask Bruce Coleman, Vancouver Mortgage Broker
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What is a Reverse Mortgage?
A reverse mortgage is properly known as the CHIP (Canadian Home Income Plan). It is another way that people living in Vancouver can access the equity that they have built up in their homes over the years.
The plan allows you to receive as much as 50% of the current equivalent value of you home, and you can receive this money as non-taxable funds to use in any manner you require.
Reverse mortgage are provided by a variety of lenders such as banks, other institutions or forms of lenders.
Advantages of a Reverse Mortgage
Unlike a HELOC (Home Equity Line of Credit),other comparable mortgage loans, or personal loans, you do not have to provide any income qualifications to be approved. The loan can not be recalled.
Also, you do not have to be concerned about making monthly payments nor do have to worry about being approved for the loan because of a poor credit rating.
The loan is only payable as principal or interest when you either sell or move from the home. However, you also have the option of repaying the loan while you are still living in the home and most lenders will even lower the interest rate on the loan if you go that route.
Another benefit of a CHIP reverse mortgage is that you also have choices and flexibility in how you receive your money. You can choose between a lump sum payment, monthly payments or both.
Does the CHIP Reverse Mortgage Have Any Qualifications?
Yes, the plan does contain some qualifications.
First, and most importantly you must be 55 years of age or older before you will be considered for a reverse mortgage.
The amount of money you eligible to receive depends on your age, the age of your spouse, the current appraised value of the home, the type of home you own and where it is located.
Will I Lose Control Over My Home?
No, because you cannot be forced to sell or move from the home until you decide to do so.
How Does the Repayment Process Work?
The amount of money you owe, both principal and interest is repaid from the proceeds of the sale of the house and any money which is outstanding is payable to you.
Should you or your spouse pass away, the money will be paid to the survivor. If both of you should pass away, any outstanding funds will go to your estate.
What About Interest Rates?
The interest rates charged on a Reverse Mortgages are very similar and in line with what you might be charged on a Home Equity Line of Credit loan. They are generally slightly higher because no payments occur until the home is sold.
Should I Get a Reverse Mortgage?
You should always speak with you financial or tax advisor before you consider this type of loan so you are fully aware of both the advantages and the potential disadvantages. You also should shop around to find the best rates so it’s always a good idea to talk to an independent broker such as myself to find the best terms and rates.