What You Need To Know About Reverse Mortgages
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What is a Reverse Mortgage?
A reverse mortgage is a special type of loan that allows you to borrow
against the value of your home. However, unlike traditional loans you don’t have
to repay for as long as you own and are living in your home. This makes reverse
mortgages appealing to seniors on fixed incomes.
How much money can I get?
You can access up to 40% of the value of your home in cash. The more your home
is worth, the more money you qualify for. Some people with high value properties
can get $500,000 or even more. The money from a reverse mortgage is also tax-free.
How can I use the money?
Unlike the money from many other types of loans, the money you receive from
a reverse mortgage is yours to do with as you please. Most people use the money
to make their home more suitable to live in. Others pay off debts so they have
more cash available each month, help their kids or travel. More and more Canadians
are using the reverse mortgage to make investments and earn extra income.
Do I keep ownership of my home?
Yes. You always keep full ownership and control of your home. The lender
never has any ownership and they cannot force you to move or sell.
How do I repay the loan?
The loan (principal + interest + fees) must be repaid when you choose
to sell your home, or no longer use it for your primary residence. You can never
owe more than your home’s value. The remaining equity in your home belongs to
you or to your heirs.
After the loan is repaid, will there be money left over for my heirs,
or to use myself?
Yes. Conservative lending practices combined with typical home appreciation
result in a large portion of home equity left over after the loan is repaid.
This money belongs to you and your estate. The exact amount depends upon several
factors, including the amount of your loan, the market value of your home, and
the amount of time passed since you originally took out the loan.
Why is it called a Reverse Mortgage?
It is called a reverse mortgage because instead of you paying your
home — your home pays you.
Is anyone eligible?
No. Reverse mortgages are specifically designed for seniors. You must be 60
or older to be eligible for this product. If you own your home with your spouse,
you must both be 60 or older to qualify.
What’s the difference between a home equity loan and a reverse
1. With a home equity loan, you must make regular payments on the loan.
With a reverse mortgage, the loan is typically paid back only when you sell
2. With a home equity loan, the lender can cancel the loan and ask you to repay
it at any time. This may occur if your income levels or credit rating changes.
Repayment may also be triggered by changes in the credit policies of the lender.
If you don’t have funds to repay the loan, you may have to sell your home
as it was used as security against the loan.
With a reverse mortgage, you maintain control and ownership of your home at
If you have plenty of available cash and are confident about making regular
payments throughout your retirement, a home-equity line may be the cheaper borrowing
option. But if you are looking for a stable and predictable source of funds
no matter what your income or credit position now or in the future, a reverse
mortgage may be the better choice
Are reverse mortgage endorsed by banks or other financial institutions?
Yes. Reverse mortgages are recommended by all major Canadian banks,
as well as credit unions, mortgage brokers and financial planning organizations.
Who offers Reverse Mortgages?
In Canada reverse mortgages are offered by the Canadian Home Income
Plan or CHIP. Reverse mortgages are also offered through all major Canadian
banks, as well as credit unions, mortgage brokers and financial planning organizations on behalf of CHIP.
How can I get more information?
1. You can call Canadian Home Income Plan directly at 1-877-541-2447
2. You can also request a free brochure online by clicking