If you own a home in Ontario and are looking for ways to access part of your home’s equity without selling or moving, you might be asking: how does a CHIP reverse mortgage work? This guide explains CHIP reverse mortgages for homeowners in Durham, Peel, and the GTA—so you can understand your options, the eligibility requirements, and what to consider before proceeding.
Key takeaways
- The CHIP Reverse Mortgage lets eligible Ontario homeowners aged 55+ borrow against their home’s equity without selling or making monthly payments.
- Borrowers can access up to 55% of their home’s value, subject to the lender’s assessment and certain conditions.
- The amount must first pay off any existing mortgage on the property; funds after that can be used for other needs.
- No regular payments are required, but interest is added to the loan and the balance grows over time.
- The loan and interest are repaid when the home is sold or the owners no longer live in it.
How does a CHIP reverse mortgage work?
A CHIP Reverse Mortgage is a loan secured by your home, available to qualifying homeowners aged 55 or older. Unlike a traditional mortgage, there are no regular monthly payments required while you live in the home. The interest is added to your loan balance, so the amount you owe increases over time. The loan is typically repaid when you sell your home, move out, or pass away.
This type of mortgage is only available for your primary residence—that means the place where you live most of the year. Your home must have an appraised value of at least $250,000. Eligibility and the amount you may be able to borrow depend on factors like your age, where you live, and the type and value of your property. Both you and your spouse (if you have one) need to be at least 55 years old.
Eligibility and borrowing limits
To qualify for a CHIP Reverse Mortgage, both applicants must be 55 or older and the home must be your primary residence with a minimum value of $250,000. The lender will arrange an appraisal and consider the property’s location, condition, and type.
HomeEquity Bank advertises access to up to 55% of your home’s appraised value, but the actual percentage may be lower depending on your situation. For example, older borrowers and more valuable or well-located homes may qualify for larger advances.
If you have an existing mortgage or a line of credit secured against your home, the proceeds from the reverse mortgage must first pay off those debts. The remainder, if any, can be accessed by you in a lump sum, in regular installments, or a combination—depending on the lender’s options and your preference.
How you receive the money
With a CHIP Reverse Mortgage, you can choose how to receive your funds after any secured debts on your home are cleared. You can take a one-time lump sum payment, scheduled advances, or a mix. Some homeowners opt for an initial payment to cover larger expenses, and then regular monthly or yearly installments to supplement income. The choice can affect how much interest builds up over time.
Costs and obligations
Using a reverse mortgage comes with costs you should understand before proceeding. HomeEquity Bank’s CHIP Reverse Mortgage typically charges a closing fee of $1,795, which is deducted from the proceeds. You’ll also need to pay for an appraisal and independent legal advice.
You must keep your property taxes and homeowners’ insurance up to date. While you don’t make regular mortgage payments, interest is added to your balance each month—fixed and variable rates are both available, and variable rates can change based on the lender’s prime rate, which follows Bank of Canada rate movements.
Repayment and estate planning
The reverse mortgage comes due when the home is sold, you move out, or when you pass away. At that time, the home is usually sold and the proceeds are used to repay the loan and all the accumulated interest. If the sale price is higher than the total owed, the remaining money goes to you or your estate. But since interest accumulates over time, the longer you have the loan, the less equity may be left for your estate.
It’s important to note that a CHIP Reverse Mortgage is not designed for most home purchases; it’s for existing homeowners who want to stay in place while accessing their equity. Consider how a reverse mortgage might impact your future options or estate, and discuss your plans with your family and legal advisor before moving ahead.
What this means for Ontario homebuyers
For Ontario homeowners aged 55+, a CHIP Reverse Mortgage can be a way to unlock cash without moving. This may be attractive for retirees, self-employed individuals, healthcare professionals, or business owners needing to supplement income or cover expenses. But it does mean converting some of your home equity into debt. The larger the amount and the longer the loan is outstanding, the more interest will pile up—and the less equity will remain in your home, either for you later or your heirs.
Ontario’s mortgage regulator stresses the importance of understanding product-specific risks and reviewing other financial options. Always get a personalized written estimate showing the interest rate, fees, payment schedule, and the projected loan balance over time. Independent legal advice is a must before finalizing any CHIP Reverse Mortgage.
Frequently asked questions
Who can qualify for a CHIP Reverse Mortgage?
To qualify, both you and any co-borrower must be at least 55, and the home must be your primary residence in Ontario with an appraised value of at least $250,000. Lender approval is required and other criteria may apply.
How much can I borrow with CHIP?
Depending on your age, property type, location, and appraised value, you may be able to access up to 55% of the home’s value. The percentage is not guaranteed and may be lower for many homeowners.
Do I have to make monthly payments?
No regular payments are required as long as you live in the home and meet your obligations, such as paying property taxes and insurance. Interest is added to your loan balance over time.
What happens if I move out or pass away?
The loan becomes due when you sell, move out of your home, or pass away. The house is usually sold, and the proceeds pay off the loan and any accumulated interest. Any money left over belongs to you or your estate.
If you’re thinking about unlocking your home’s equity and want to see if a CHIP Reverse Mortgage fits your needs, book a free 30-minute discovery call with Satish Kumar at Mortgage Architects. Together, we’ll review your situation and help you understand all your options.
Disclaimer: This content is for general information only and is not personalized mortgage or financial advice. Please consult a licensed mortgage professional and independent legal advisor before making decisions about a CHIP Reverse Mortgage or any mortgage product.
