A CHIP Reverse Mortgage is a great answer for seniors with Canada’s recent housing market boom. According to the Canadian Real Estate Association (CREA), between April 2020 and April 2021, the average house price rose by a 41.9%. The average purchase price rising to $696,000 and data from previous years is similarly impressive.
This is, of course, great news for homeowners, but perhaps not such great news for those trying to get in on the property ladder. This has led to a boom in older Canadians helping their adult children with the funds or a down payment. According to a recent Bank survey, 31% of Canadians would help their adult child pay for a new home.
If this is you, it’s important to ask yourself how you will access the funds to help your child. You too can do the same while maintaining your own financial security. Check out the CHIP Reverse Mortgage Calculator to find out how you can access home equity
Withdrawing from Investments
Some people turn to savings and investments when they want to access a large sum of money. However, this may not always be the best idea. Cashing in investments has the potential to trigger taxes and OAS and CPP clawback. This could also as push up your marginal tax rate. Because it can also damage your overall portfolio, this may also have a negative effect on your future retirement income. Therefore, with more and more Canadians at risk of outliving their retirement savings this is very important to bear in mind.
Using the Equity in Your Home
In order to avoid the downsides of withdrawing from investments, you can use your home’s equity to help your adult children, that way they also benefit from Canada’s red-hot housing market and the equity it’s enabled you to build up.
One way of accessing the cash in your home is through a home equity line of credit (HELOC). This revolving line of credit secured against your home that allows you to borrow up to 65% Loan to value. A HELOC can be a good way of accessing cash. With more 55+ borrowers having their applications denied simply because they lack a regular income due to being retired. Another drawback to the HELOC is the fact that the debt must be serviced monthly, which can eat into your monthly income.
The CHIP Reverse Mortgage
Another way of accessing the cash in your home is with the CHIP Reverse Mortgage. The CHIP Reverse Mortgage allows you to access up to 55% of your home’s value in tax-free cash. This can be used to gift an early inheritance to your adult children. Therefore helping them get into the property market and help the entire family.
The money you receive won’t damage your investment portfolio and won’t trigger taxes or OAS/CPP clawback. What’s more, since you only pay back what you owe once you leave your home, there are no monthly repayments adversely affecting your retirement income.
The CHIP Reverse Mortgage is a product that’s designed specifically for Canadian’s 55+ with an approval process to fit. This means we don’t discriminate against retirees or those without a regular income, all you have to do is own your home.