Reverse Mortgage Blog: Part 3

Author: Homeguard Funding Ltd. |

Mortgage Broker Bradford

If you’ve read parts one and two of our Reverse Mortgage series, you are hopefully better informed about the myths and misconceptions, advantages and disadvantages of this financial tool. Now let’s take a look at the available products, and how one might use them.

You may have seen advertisements for the CHIP reverse mortgage. This is the original product – and still the most popular – although it has changed over the years to better serve clients better.

CHIP allows you to take an initial lump sum, the minimum being $25,000, regardless of how much has been approved. And it can be used for a wide variety of purposes that include:

  • Paying off the debt that is causing stress and draining cash flow
  • Renovations that could increase the value of your home
  • Buying a second home or cottage

There are many other uses, but this gives an idea on how the proceeds of a CHIP mortgage might benefit the homeowners. Keep in mind as well, that the money is tax-free.

Next is the Income Advantage Program, which I like to characterize as a tax-free RRIF. This mortgage allows clients to supplement their retirement income.

You are obligated to take a minimum lump sum of $20,000, but an Income Advantage mortgage then provides either monthly, quarterly or semi-annual advances of a minimum $1,000 per draw. Like a line of credit, interest accrues only on the outstanding balance, not on the full amount approved.

Clients often use Income Advantage for:

  • Enhancing their day-to-day lifestyle
  • Increasing monthly/periodic cashflow
  • Protecting their investments

A relatively new product is the CHIPMax mortgage. It is similar to the CHIP mortgage, but is available in select locations – usually major urban areas such as the GTA or GVA. If you qualify for CHIPMax, your advisor will be able to outline the available options, comparing both the CHIP and CHIPMax terms and conditions.

Clients might use the CHIPMax mortgage for:

  • Avoiding high-interest loans or an additional mortgage
  • Boosting their income
  • Maintaining (or elevating) their retirement lifestyle

The newest Reverse Mortgage is the CHIP Open. This long-awaited product is a good fit for clients seeking a flexible, and potentially short-term financial solution. Closing costs are a little higher than for other reverse mortgages, but the product is completely open and can be paid at any time in its entirety – without penalty.

This can be a considerable advantage, as other reverse mortgages (with certain exceptions) can impose a significant penalty should you decide to pay them off within the first three years.

Some of the potential uses for the CHIP Open mortgage are:

  • Bridge financing, or as a short-term cash-flow solution
  • Funds to renovate your home before sale to maximize the return
  • Helping a family member with emergency expenses

As you can see, the solutions and opportunities are many, and require some research. There are multiple providers for reverse mortgages in Canada. Not all products are offered by all providers however, with recent changes depending on location and age you may have more options than you think.

Meeting with your Mortgage Broker who is a Reverse Mortgage Specialist is a good first step.

In our next blog, we will outline some case studies that demonstrate how reverse mortgages have helped in real-life situations.


Richard Mewhinney is a Mortgage Broker with Homeguard Funding Ltd. and is a Certified Reverse Mortgage Specialist.

This post is intended for information purposes only. Each individual circumstance is different, and if you are interested in specific details for your situation, please contact a Reverse Mortgage Specialist

Click here for more info on Chip Reverse Mortgage