For homeowners age 55 or older who want to access the value
in their home, the new Income Advantage plan from CHIP reverse mortgage offers
a number of benefits:
Cash Flow Freedom. Clients may use the
money any way they wish, and no payments (interest or principal) are required
until the home is sold or both homeowners move out.Ownership protection. Title remains in the homeowners’ names and they will never be asked to move or sell to repay their CHIP Home Income Plan.
Estate protection. The amount to be repaid is guaranteed not to exceed the fair market value of the home at the time it is sold, protecting the homeowners and their estate. In our experience, more than 99% of homeowners have equity remaining after repayment.
Tax benefits. CHIP Funds are tax-free and will not affect eligibility for government benefits such as Old Age Security.
Preserve assets. Using CHIP funds enables your clients to avoid RRIF withdrawals above the annual minimum or the sale of non-registered investments.
How does it work?
The new Income Advantage from HomEquity Bank,
the originator of the CHIP Reverse Mortgage, allows homeowners to receive lump
sum payments, monthly payments or a combination of both. The flexibility of
this new program allows people to plan carefully, reduce overall interest and
maximize the preservation of home equity. Qualification is as simple and
straightforward as a traditional Reverse Mortgage, homeowners over 55 can
access up to 40% of the equity in their homes but have total control over how
they receive funds. Since interest only accumulates on the amounts withdrawn
(like a HELOC), annual interest is minimized vs accrual and compounding on a larger lump sum.
Clients also have the option to make a 10% prepayment towards principal and
interest once a year, on the anniversary date of the mortgage.
Example: A retired couple has a $500,000 house
with a $250,000 investment portfolio for an overall net worth of $750,000. They
need additional funds to pay for home repairs and income to cover Home Care
expenses, should they tap into their portfolio or leave it alone to grow and
look for other solutions? They are not ready to downsize yet and do not want to rely on the help of their children who are working to save for their own retirement.
Solution: Income Advantage arranges to give the couple an initial lump sum of $10,000 to cover home repair costs and a monthly advance of $750. After ten years this is where they are at:
Money advanced over ten years is $100,000 plus
interest for a total of $126,900.Solution: Income Advantage arranges to give the couple an initial lump sum of $10,000 to cover home repair costs and a monthly advance of $750. After ten years this is where they are at:
Investment portfolio saw an overall return of 6% per annum and has grown to $447,711.92
Home has seen an average increase of 2% per year and has grown to $609,497.21
After ten years overall net worth has grown
to $930,309.13
This is a general overview of what the Income Advantage can do and every situation is unique. In the end it is best to get qualified, professional advice and put together a plan that takes into account the whole picture.