How does the reverse mortgage work?
A reverse mortgage in Canada allows homeowners aged 55 and older to convert part of their home equity into tax-free cash without selling their home. The home must be the principal residence. Both the homeowner and their spouse must meet the age requirement if both are on the title.
The amount you can borrow is based on your age, the value of your home, and the location of your home. Generally, older homeowners can borrow more, up to a maximum of 55% of the home’s appraised value.
You can receive the funds as a lump sum, regular monthly advances, or a combination of both. The funds are tax-free and do not affect Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits.
Unlike traditional mortgages, you don’t make monthly mortgage payments. The loan, including interest and fees, is repaid when you sell your home, move out, or pass away.
Interest accumulates on the outstanding balance over time. Since no payments are made, the amount you owe increases over the loan period. Interest rates are typically higher than conventional mortgages.
The loan must be repaid when the homeowner sells the home, moves out permanently, or passes away. Homeowners retain ownership of their home and can never owe more than the home’s fair market value when it’s sold, provided they meet their obligations, such as paying property taxes and home insurance.
There may be setup fees, such as appraisal fees, legal fees, and closing costs. Homeowners must continue to pay property taxes, home insurance, and maintenance costs.
Home loan calculations for 20 years (example)
| Amount, $ | Rate, % | Accrued %, $ |
| 400,000 | 4.75% | 191,583 |
| 400,000 | 4.75% | 191,583 |
| 400,000 | 4.75% | 191,583 |
| 500,000 | 5.25% | 264,688 |
| 500,000 | 5.25% | 264,688 |
| 500,000 | 5.25% | 264,688 |
| 600,000 | 5.75% | 347,875 |
| 600,000 | 5.75% | 347,875 |
| 600,000 | 5.75% | 347,875 |
| 700,000 | 6.25% | 441,146 |
| 700,000 | 6.25% | 441,146 |
| 700,000 | 6.25% | 441,146 |
What are the chip reverse mortgage rates in Canada?
The CHIP Reverse Mortgage, offered by HomeEquity Bank, has interest rates that can vary depending on several factors including the type of product (fixed or variable), the loan amount, and the term of the mortgage. The Variable Rates typically are around 6% to 7%, fixed rates from 6.5% to 8%.
You can also see the similar FAQ about:
- Cash back mortgage proposal in CIBC
- Does CIBC cooperate with mortgage brokers
- Does Equitable Bank charge the mortgage penalty?
- Equitable Bank appraiser list
- Financial calculators from Vancity Credit Union
Details of companies offering the financial services:
Clover Mortgage
Head office’s address: 7 City Centre Dr Suite 150, Mississauga, ON L5B 1M5
Contact center: 1-416-674-6222
Web-site: https://clovermortgage.ca/
Jeff Di Lorenzo
Head office’s address: 122 Lower Bench Rd, Penticton, BC V2A 1A8
Contact center: 1-877-744-3436
Phone: 778-839-3963
Web-site: https://yourequity.ca/
Lendtoday
Head office’s address: 179 King St E, Oshawa, ON L1H 1C2
Phone: 1-855-242-7732
Web-site: https://www.lendtoday.ca/
Mortgage Commitment Powered By Centum Financial Services FSRA
Web-site: https://mortgagecommitment.ca/
Turnedaway
Head office’s address: Unit 1 - 179 King St E Oshawa, Ontario
Phone: 855-668-3074
Web-site: https://www.turnedaway.ca/
CHIP Reverse Mortgage
Web-site: https://www.chip.ca/
Equitable Bank
Head office’s address: Equitable Bank Tower 30 St. Clair Avenue West, Suite 700 Toronto, Ontario
Contact center: 866-407-0004
Phone: 416-515-7000
Web-site: http://www.equitablebank.ca/
Swift code: EQFXCAT1
Stock code: EQB
BSB: 623
True North Mortgage
Web-site: https://www.truenorthmortgage.ca/