How Divorce Impacts Mortgages in Canada
Divorce is a defining end to what’s supposed to be a beautiful journey in life. According to Statistics Canada, more than one-third of Canadian marriages end in divorce – 70,000 every year. In many cases, however, it marks the beginning of several bitter chapters of contention. Nowhere else is this harsh reality more evident than a mortgage.
Divorce usually involves splitting nearly everything in two – children, friends, and finances. A divorced couple also grapples with how to divide a mortgage appropriately. This exercise is complicated, to put it mildly.
It’s easy to understand why a mortgage is a big deal: a home is the most valuable asset for many couples. As a result, a mortgage is usually the biggest liability they’ll face. So, while they can tell each other it’s over, their debts can bind them together for a long time afterwards.
This article shares essential details of how divorce impacts mortgages in Canada. If you’re on the verge of divorce, you may want to consider, in earnest, what would happen to your family home and, by implication, your mortgage. It's a process that can drain the strongest of us, making it necessary for you and your spouse to agree on what to do about it.
Remember, no spouse can legally sell, lease, or refinance the home without the permission of their [still] significant other. Until there’s legal documentation of your separation, you’re still technically married, meaning you need their permission to buy another property or sell the current one.
Divorce and Mortgage Across Canada’s Provinces
A divorce is an emotional abyss that traumatizes both parties. The paperwork can cause much frustration, and it’s a crucial time to know what’s going on with your finances.
You’ll need all the help you can get as laws governing how spouses divide home equity differ across Canada's provinces. Sometimes, it's several homes involved where the couple shares a cottage or vacation property. Those laws determine who'll leave the table with the short end of the stick.
So, who gets what? In some cases, prenuptial agreements and other assets, such as inheritances, investments, and vehicles, are the deciding factors.
In most cases, homes and mortgages are divided down the middle, and a legally separated couple has the same basic divorce and mortgage options.
Release of Dower Rights
There is a legal statute existing to protect the spouse of any registered owner of real estate. Known as the Dower Act, it requires their consent to finance and sell a piece of property even without their names being on the title.
This spouse protection is available on any real estate that either party has occupied or will occupy while still married. In more straightforward language, if you or your spouse has lived in a property, you may have legal rights to that property even if you're not legally on the title to it.
Lawyers can explain better if you find the Act hard to understand.
How a Divorce Can Impact Your Mortgage
Among other consequences, walking away from a marriage can affect the credit score of you and your spouse. Considering your credit score will help you be financially independent and allow you to own a home by yourself.
In some cases, there may be an agreement to sell the house. Here are a few implications of this decision:
#1 – How much is your property worth?
The common expectation is for you and your spouse to split the asset. What percentage each one gets is strictly the call of the courts, however.
#2 – Penalties
A divorce may happen without concern for the mortgage. Your mortgage lender's policy could mean you'll pay the penalty for exiting the contract early. However, there's the option to redo the contract if your goal is to retain the title minus your spouse.
#3 – Real estate fees
If you're selling the house, probably to buy another one, you should consider closing costs and lawyer fees.
#4 – Pre-approval
Getting a new mortgage means going through another pre-qualification round. It involves assessing your income and what you can afford. Most lenders will ask to see three months of alimony or child support payments deposited to your account before giving your application a look.
#5 – Possible extra expenses
For anyone looking to get a new mortgage, it’s advisable to take the opportunity to access the equity in your property. You could also consolidate high-interest credit card debt.
A gruelling divorce can shift your focus from your finances, but that should never be the case. It’s best to sort out legal documents and address the mortgage; it makes it easier to transition to new beginnings.
Emotions are one reason a divorce can get messy. But, your mortgage and other finances must remain intact. Being proactive about your mortgage can help to protect your credit score.
No one’s in complete control of their finances after a divorce, so working on your mortgage can be essential in keeping your sanity.
What if Your Home is in Negative Equity?
When your home falls in value after you’ve bought it, that’s negative equity. Selling a home that fits this description means you’ll not have enough to pay off your mortgage.
Negative equity is more common after a property price crash. Anyone may experience the bad luck of having it happen around the time of their divorce, making it necessary to do something else instead of selling.
One option is for one spouse to buy the other one out – that is, if they can come to terms. But, this is easier when property prices are low.
Agreeing to sell at a loss means working out a way to share the debt as part of the financial payment.
How does a spousal buyout work ?
A spousal buyout mortgage lets you buy out your partner's equity in your current home and can pay out joint debt. Of course, you become the sole owner of the property.
The home equity is determined by the current value of the home which can be done by a professional appraiser and then you minus the mortgage balance and any penalties that could be associated with paying this mortgage off. Let’s say you have a $300,000 mortgage and the value of the home is $600,000, then you would have $300,000 in equity. If the agreement is to split this amount then the person keeping the home would take out a new mortgage of $450,000. This means $300,000 to pay off the existing loan and $150,000 would go to the spouse coming off title.
If there is little equity in the home and you need to borrow more than 80% of the value of the home, CMHC has a special program that allows you to borrow up to 95% of the house value with a separation agreement already completed. The separation agreement needs to be exact in terms of buyout numbers for the matrimonial home and debts. How much your spouse will receive on the buyout as well as which debt and how much of the debts will be paid out?
- A purchase and sale agreement also needs to be drawn up between the two parties that indicates the current value of the home (which is the sale price) , the exact buyout amount, and any joint debt. Separating or divorce is the only time CMHC will allow you to finance more than 80% of the value of the home after you purchase.Using a spousal buyout mortgage allows you to get mortgage approval up to 95% percent of the value of the matrimonial property. But, here’s what you can pay out with this mortgage:
- You can pay out your spouse’s home equity debt.
- You can pay out non-mortgage debts such as car loans or credit cards accumulated during the marriage.
Including these in a new mortgage means that you’ll clearly state them in the divorce agreement. - You have to pay out the current and existing mortgage on your homes.
- You cannot channel the funds for personal use or at your discretion.
Conclusion
Living expenses are more likely to increase when you live alone. It’s more expensive to maintain a home by yourself. The Wilson Team Ottawa mortgage brokers can help you lighten the strain of divorce.
The Wilson team is especially adept at helping people recover from tumultuous life situations like divorce. They are relentless and successful at helping individuals in difficult financial situations sort out their mortgages.
Get in touch today to ensure that your divorce doesn’t leave you in dire financial straits. Do not get into the wrong product, lender, bank, terms and structure. Call the experts and we will walk you through all of your options and next steps.
Canadians Fighting to Get Mortgage Pre-Approvals
In fear of the low-interest era coming to an end
A lot of people sat back during the pandemic, hoping the house prices will decrease but have since accepted that is not so likely to happen. Most people are afraid to get into the home buying experience and say if interest rates go up, they will not be able to purchase a home. That's why currently, there are a lot of people trying to take advantage of the pre-approvals and not miss out on low rates.
The Canadian Real Estate Association said the national average home price has gone up 13.9 percent. In Toronto, it's even worse. Homebuyers there pay 20 percent more than they did last year. Rate hikes will make this percentage even higher.
It's obvious that sellers are currently at an advantage since homebuyers barely have the opportunity to put in any conditions for a purchase or an offer. Why? It's not just the pandemic - it's a simple supply and demand case. Add up the low-interest rates, immigration, and inflation and you get the perfect storm the homebuyers are currently in.
At this moment, the country's top five banks' rates are between 2.62 percent and 2.94 percent for five-year fixed mortgages, while for the variable ones that number decreases to 1.40 and 1.75 percent. The interest rates have sat at 0.25 percent since March 2020, but as the Bank of Canada has hinted and other economic experts predicted - it could rise as the country loosens the COVID-19 restrictions.
Homes aren't getting cheaper and the people know it. Many housing markets are making it too hard to keep purchase prices down - this being the reason why more and more people are doing their best in finding ways to hold to current rates. One of the ways is getting mortgage pre-approvals and rate holds before interest rates become higher.
Considering how mortgage rates are slowly getting higher, there is a big chance the Bank of Canada will increase the interest rate by more than people expect it, according to BMO Capital Markets senior economist Robert Kavcic who suggested that those with contracts in hand have a bit more time to buy something than those without.
It comes as no surprise that in a recent survey, more than one-third of Canadians between the ages 18 and 40 said that they no longer believe they will ever be able to own a home. The Canada Mortgage and Housing Corporation said that this housing markets situation won't wear off for another two years, meaning that even then, the prices won't come down, they just won't rise as fast.
Adult Children Were Given $10B to Buy Homes
Parents are the primary source of down payments
While Canadian home prices are increasing and becoming less affordable, people are still managing to buy properties - mostly with the help of their parents.
CIBC published a report saying that, in the past year, around 30 percent of first-time homebuyers received financial help from their parents and were gifted an average of $82,000, while mover-uppers were gifted an average of $120,000. During the pandemic, however, the number of families helping out fell among those who had already bought a home before.
Benjamin Tal, Deputy Chief Economist of CIBC World Markets and the author of the report, said that overall, they "estimate that over the past year, gifting amounted to just over $10 billion, accounting for 10% of total down payments in the market as a whole during that period.”
This doesn't mean that parents were going into debt to enable their children their own homes; Tal estimated that only about 5.5 percent of parents in 2020 went into debt to finance the money for their kids' down payments. Most of the gifted money comes from the parents' savings, and while this is a nice gesture, it creates a big inequality between people who can and cannot count on their parents' help.
Homebuyers who received these gifts can cover a big part of their down payment, and therefore have a lower interest mortgage. Oftentimes, having money for a downpayment can make a difference between owning and not owning property, so it's safe to conclude that these gifts aren't doing a favour to narrowing the wealth gaps among young adults.
“Given the trend and the size of gifting, it is clear that this phenomenon is becoming an important factor impacting housing demand and therefore home prices in Canada,” the report said.
The reason behind this could be the sense of urgency parents have when it comes to helping their kids buy a house in the middle of inflation, the current house bubble, and the pandemic.
Eight Things You May Not Have Realized About Reverse Mortgages
You don't actually lose your home
Most common among retirees, a reverse mortgage is mostly used for paying off debt, making renovations or financing health expenses. Since there isn't an obligation to make regular payments with this type of mortgage, a reverse mortgage is often the go-to solution for many Canadians. Even though they're not new in Canada and are, in fact, highly regulated, there still are some misconceptions regarding reverse mortgages we will explain in this article.
You can't apply if you're younger than 62
In Canada, reverse mortgages are available for homeowners who are at least 55 years old. However, the older a homeowner is - the more money they qualify for.
Eviction
Getting evicted if no payments are made is one of the biggest fears and myths out there. With a reverse mortgage, there aren't any regular payment obligations, therefore a payment can't be missed.
Losing ownership
Just like with a regular mortgage, the homeowner has full control of their home. The bank cannot force anyone to sell their home and a person is allowed to live there as long as they wish. The only obligation is keeping the property well-maintained and paying property tax and insurance.
The heirs lose the property
If someone inherited the property under a reverse mortgage, they have the opportunity to pay off the reverse mortgage of the person they inherited it from.
Owing more than the property is worth
As long as the property is in good condition and the property tax is paid, homeowners will never owe more than they should. Coming back to heirs, after the property is sold and the mortgage paid off, they usually end up with more money left.
The spouse has to move out in case of death
The surviving spouse is not forced to move out. There are no obligations to move out or to make payments until they move or sell their home.
It's expensive to arrange
Like with any other conventional mortgage, there has to be a payment for an appraisal of the property. The other cost is the closing fee.
Interest rates are higher than usual
This one is not technically a lie. Since this type of mortgage is not a traditional one, the interest rates can be a bit higher - because there are no monthly payments. Based on their income, a lot of retirees in Canada cannot afford regular monthly payments and therefore cannot apply for a conventional mortgage - so they opt for the one with no monthly payments.
We can help
No one wants to get into something they know nothing about. Before you decide what type of mortgage would suit you best, be sure to do your research first. If you're thinking about going for a reverse mortgage but aren't sure how much it would cost you, try using our online mortgage calculator. Our team is dedicated to changing your financial future and can help you find out what you need. Call us on 1-855-695-9250!
Zero Down Mortgages Could be the Next Big Canadian Mortgage Trend
Experts Warn that Growing Debt Loads Could Lead to Financial Crisis
With the pandemic has driven housing prices to record-breaking highs, a new mortgage trend has some experts worried about the potential implications on Canada's housing market – zero down mortgages.
Often associated with the U.S. financial crash in 2008, zero down mortgages allow borrowers to obtain financing without putting up money of their own for a down payment. They have experienced a resurgence in the U.S and Canada over the past year. The reason for this is that many first time buyers are being priced out of the housing market, and are unable to save for a massive down payment due to skyrocketing rent and home prices.
According to Bloomberg, high-risk mortgages that allow home buyers to borrow the money for their down payment or receive cash back after closing are now becoming the new normal. This, combined with low mortgage rates, has many policy makers and financial experts very concerned about a collapse similar to the 2008 financial crisis.
In fact, in the Bank of Canada's 2021 Financial System Review, policy makers identified the risks of deteriorating mortgage quality.
Fortunately, Canada has regulations in place to prevent most lenders from lending to high-risk applicants. Even still, Bloomberg reports that those considered to be "low-risk" are now taking on larger debt loads than ever before and having little equity to show for it - so much so that borrowers with high loan-to-income ratio now accounts for 17% of new insured mortgages. Two years ago, they only accounted for 6.5%.
According to the Bank of Canada report, this is “the most economically significant factor associated with future financial stress."
It's difficult to say whether this trend will continue, or taper off as the housing market starts to cool. But with inventory increasing and home prices starting to dip across Canada, this is a positive sign of things to come for buyers.
Canadian Real Estate Market "Cooling Off" After Skyrocketing Home Prices
Home Prices Continue to Dip As Inventory Increases
It's been nearly a year and a half since the global pandemic set the Canadian housing market on fire, and buyers are finally seeing a light at the end of the tunnel as prices continue to dip.
According to Canadian Real Estate Association (CREA), home prices in real estate markets across Canada have dropped for the third consecutive month since peaking in March.
While home prices are still 26% higher compared to one year ago – the average national home price is $679,051 – overall, the average home price has gone down by 1.3% since May, and 5.3% since March. For comparison, the average home price was $716,828 in March 2021.
In Ontario, the average home price is $857,754. In Ottawa, the average price is $671,400.
Across Canada, home sales have also dropped by 8.4% since May, as prospective buyers experience "buyers fatigue" due to the intense competition brought on by low inventory, bidding wars, and rising house prices during the COVID-19 pandemic.
Meanwhile, inventory is also increasing, with the the number of newly listed properties expanding by 0.7% between May and June.
While this is good news for first-time buyers who have struggled to enter the housing market this past year, CREA warns that there are still supply shortages in many parts of Canada.
“While the frenzy and emotion of earlier in the pandemic seem to have dissipated for now, the key ingredients of a seller’s market are all still in place,” said CREA’s senior economist Shaun Cathcart, “It’s a long road to get back to normal, and for many housing markets, the main issue is that supply shortages are as acute as ever."
This Demographic is Giving Real Estate Professionals a ‘Trillion Dollar Opportunity’
Plus, the Right Mortgage For Homeowners Over 55
Since the COVID-19 pandemic left its mark on the Canadian housing market, the real
estate industry has had its watchful eye on what to do next.
The housing market has been strong, and despite a drop in equity market valuations at
the beginning of the pandemic, there’s been a notable turnaround.
Following this period, what surprising demographic should real estate professionals be
thinking about – and how can homeowners make the most of this process?
A recent web seminar titled ‘Riding the Retirement Wave’ featured experts who offered
answers to these questions. The webinar featured Jason Mercer, the Toronto Regional
Real Estate Board’s chief market analyst, and Sue Pimento, the vice president of referred
sales at Home Equity Bank.
Recovery is a Puzzle
In summer 2021, the housing market is strong, and if Mercer is right, it’ll stay that way
for a while.
On the webinar, Mercer explains that housing demand is a puzzle made up of three
parts:
- Long-term population growth
- High employment rates
- High or increased income levels
All three factors, he says, are looking good in the near future.
With vaccination numbers increasing, population growth, immigration, and business
recovery are looking better than it has in a long time – and this, Mercer says, will lead to
an increased demand for housing.
On the subject of inflation, Mercer points to where borrowing costs are going.
“The Bank of Canada is laser-focused on inflation and keeping it around the 2% mark
over the long-term,” he said in the webinar.
It is anticipated that the Bank of Canada will raise interest rates, but the stress test will
ensure that homebuyers are approaching the process with a net of safety.
So, how can the real estate industry maximize success from what Mercer and many
others believe will be an uptick in demand? There’s a “trillion-dollar opportunity” with
one particular demographic.
Riding the Retirement Wave
On the webinar, Pimento explained that the current housing market tends to target
first-time buyers and younger groups like millennials – but this, she says, isn’t
necessarily the right way to find success.
Instead, Pimento suggests marketing to those over the age of 55, as there’s home equity
that can be worked with among this group.
“A trillion dollars – that’s how much home equity there is,” she explained, adding that 42
percent of homeowners in Canada are 55 or older.
The CHIP reverse mortgage offers homeowners in this age group the perfect
opportunity to capitalize on success – without having to down-size or compromise
similarly.
“Everybody has figured out downsizing doesn’t work - not very many people can yield
enough money to retire on, unless they move hours outside of their neighbourhood,”
Pimento explained. “No wonder they don’t want to list their home.”
CHIP is a type of reverse mortgage that allows homeowners to tap into the value of their
home without having to move or sell. This is done using the home’s equity and allows
homeowners to get up to 55 percent of their home’s appraisal value.
Homeowners who take advantage of CHIP may choose to help their children, finance
further purchases, or upgrade their home to increase its sale value.
“It’s simply a mortgage with optional payments,” Pimento said. “It’s a tax-free way of
accessing equity to finance retirement, among other things with very little qualifying
criteria”
If you’re 55 years of age or older, ask your mortgage broker if CHIP could be right for
you.
Home Sales, Property Listings See Drop In May
Data Reveals Decrease In Canadian Housing Market Activity
New data suggests that Canada’s fiery housing market might be finally cooling off.
The Canadian Real Estate Association (CREA) released its set of monthly statistics for May 2021 on June 15. The data shows that national home sales have continued a downward trend, dropping 7.4 percent from April to May.
Meanwhile, the number of new property listings across Canada has also dropped by 6.4 percent from April to May. This is the fourth month in a row that the ratio of sales to new property listings has dropped.
The news follows months of concern regarding Canada’s heated housing market. For months, demand for housing has gone far above the supply, leading to higher home costs and unmanageable mortgage rates. Experts have warned that Canada could be facing an overheated market this summer.
CREA’s latest data is reassuring for those concerned about overheating. The 7.4 percent decline in sales follows the 11 percent decline from March to April, and suggests that the market is ready to cool down.
“While housing markets across Canada remain very active, we now have two months of moderating activity in the books, and that goes for demand, supply and prices,” said CREA chair Cliff Stevenson. "More and more, there is anecdotal evidence of offer fatigue and frustration among buyers, and the urgency to lock down a place to ride out COVID-19 would also be expected to fade at this point given where we are with the pandemic.
CRA’s Senior Economist Shawn Cathcart added that, “with the synchronous cooling off of demand, supply and prices in recent months, one could draw comparisons to last year’s initial lockdowns, but this year feels different.”
Cathcart explains that the housing market initially came to a halt following the beginning of the COVID-19 pandemic in March 2021 – though it eventually picked up, demonstrating patterns that did not reflect what would normally be seen in a typical year.
“The slowdown in the market was coincident not just with record COVID-19 cases and fresh lockdowns but with the take up in the vaccination rate, so maybe we all finally have something else to think about other than housing and being stuck at home all the time,” he added. “Going forward, there is still a good probability of increased churn in resale markets as we get more certainty around our post-COVID lives and people move around more than they would have in a non-COVID world. But for now at least, with the light at the end of the tunnel so close, it feels like housing may take a back seat to us all starting to get our lives back to normal this summer
Canadian Homeowners Warned Following Rapid Increase In Mortgage Loans
Experts Fear Effects Of Red-hot Housing Market On Homeowners
Mortgage experts are warning that the recent sharp increase in mortgage loans will come at a steep cost for Canadians.
On June 18, the government reported that Canadians have broken the record for the fastest monthly increase of housing loans in the country’s history. Homeowners took out nearly $18 billion in new mortgage loans, leading to a total of $2 trillion in housing debt in the country. Canada’s total mortgage debt has grown by 7.8 percent over the last year.
Throughout 2021, Canada’s housing market has been red-hot; demand for housing has rested high above the supply, and prices have risen accordingly. With more debt being required to pay off mortgages, Canadians have gone in over their heads, experts fear.
C.D. Howe Institute economist Jeremy Kronick explains that the country’s sky-rocketing mortgage debt numbers are not surprising consider the state of the housing market.
“The fundamentals here are pretty clear,” he says. “Over the course of the pandemic there have been low interest rates, tight housing supply, and big increases in disposable income. At the same time, debt servicing costs are actually lower now than they were before the pandemic. So, you combine all those things, and it’s not really surprising that people are taking on more debt.”
The Bank of Canada has argued that new measures should be put in place to make it harder to obtain a mortgage – this would stop buyers from ending up with mortgages that they may be unable to pay off.
This month, Canada’s federal banking regular tightened rules pertaining to mortgage stress tests for the same reason.
As mortgage debt continues to rise, experts fear that homeowners will struggle to pay off their loans if the Bank of Canada raises interest rates later this year.
Inflation is expected to subside eventually – but if it continues to rise rapidly, experts believe interest rates could increase sooner than expected.
Pedro Antunes, chief economist at the Conference Board of Canada, warns that homeowners taking on larger mortgages should be aware of the risk they’re taking.
“The real risk is around a housing market correction,” he said. “We’re starting to see home prices declining and there’s a real risk this could unravel more than we expect.”
Following a heated housing market, the average price for a home in Canada has increased by 38 percent over the last year. Numbers finally began to show signs of cooling in May, with a slight decrease of home sales – and according to Antunes, we may see a slight correction in housing costs in the near future.
CHIP Mortgages – Now’s the Time!
Reasons to Consider a CHIP Reverse Mortgage
During the pandemic, seniors across Canada have been flocking to take advantage of CHIP Reverse Mortgages and there’s no sign of the trend slowing down. The Wilson Team of Mortgage Experts is happy to assist you in joining the growing number of Canadians who are benefiting from this opportunity.
What is a Reverse Mortgage?
A reverse mortgage is a loan secured against the value of your home, offered by HomeEquity Bank or Equitable Bank. It’s a convenient vehicle for taking advantage of the equity you’ve earned in your home over the years, instead of dipping into savings or cashing in your portfolio. Undoubtedly, the value of your home has grown over the years and is worth much more than you originally paid for it. Much of that equity is at your fingertips in the form of a reverse mortgage.
Once you are approved for a reverse mortgage, you can obtain your loan in a lump sum or installments. The money is yours to use for any reason: travel, home repairs, a fancy car, or helping your children make a down payment on their own home. You’re the boss.
CHIP (Canadian Home Income Plan) mortgages, the brand issued by HomeEquity Bank, allow seniors to borrow up to 55 per cent of the appraised value of their home – ideal when home prices are appreciating and interest rates on home loans are low.
There are also no monthly loan payments required. Seniors don’t pay back the CHIP until they sell the house, so they can stay in their homes and communities without worrying about the expense of doing so. Once the home is sold, the loan must be repaid; any balance remaining goes to the seniors or their estate.
Another bonus is that the money you borrow is tax-free and it does not affect any Old-Age Security or Guaranteed Income Supplement (GIS) benefits seniors are receiving. The homeowner must, however, maintain the home and remain current on property taxes and homeowner’s insurance.
Why Now?
Global News has reported that Canada’s two reverse mortgage lenders both saw a surge in loans in 2020: Home Equity Bank had a 14 per cent increase in new reverse mortgages during the last quarter of the year, while Equitable Bank doubled its reverse mortgage balance between Nov. 2019 and Nov. 2020. Part of this interest is due to concerns about long-term care, given the spread of COVID-19 in those facilities; seniors are more eager to age in place in their homes. However, much of the interest stems simply from the climbing house prices and the low mortgage interest rates that will allow seniors to get a loan cheaply to access the value buried in their home, an amount that has likely grown since it was purchased.
Easy to Arrange
The Wilson Team of Mortgage Professionals is here to guide you through the process of obtaining a reverse mortgage; it’s painless.
Not all lenders offer reverse mortgages. In Canada, the major recognized lender is HomeEquity Bank. The bank began in Vancouver in 1986 as the Canadian Home Income Plan Corporation. In 2009, it became a chartered bank, recognized as a Schedule 1 Canadian Bank, HomeEquity Bank. Today, its head office is in Toronto. Equitable Bank also offers reverse mortgages.
To apply for a CHIP Reverse Mortgage, you will need a current appraisal of your home’s value. Once you have the appraisal done, the lender will consider these factors in evaluating your application:
- Your age and your spouse's age;
- Location of your home;
- Type of home (e.g., detached, condo, townhouse, etc.);
- The appraised value of your home;
- The condition of your home; and
- Your home equity.
Once the lender approves your application, you’ll need the services of a lawyer to finalize the transaction. When you meet with your lawyer, you’ll need to have:
- Valid and adequate home insurance;
- Property tax statement (current year or deferred property tax statement);
- Two pieces of valid identification;
- Power of Attorney and Power of Attorney Identification (if applicable); and
- Statements for any secured debt.
Before deciding upon a CHIP Reverse Mortgage, you should consult your financial advisor – and the Wilson Team will be happy to recommend one of the professionals with whom we work regularly. There are advantages and disadvantages to choosing a CHIP.
Advantages
- Tax-free money to use as you see fit;
- CHIP income doesn’t affect Old-Age Security or Guaranteed Income Supplement benefits;
- No need to make regular payments on the loan;
- You maintain ownership of your home;
- Your income and credit are not part of the evaluation for a CHIP;
- Repayment is not required until you sell your home, the surviving partner passes away or you reach the maximum borrowing amount;
- The amount you owe can never exceed the value of your property;
- Interest paid on the CHIP is tax-deductible if the loan was used to earn investment income;
- You and your beneficiaries will not be responsible for any shortfall if interest rates rise and housing values drop; and
- You can repay the loan at any time, although penalties may apply.
We at the Wilson Team of Mortgage Professionals would be happy to help you explore the CHIP Reverse Mortgage and determine if it is right for you. Contact us today for an exploratory meeting.