According to the Financial Post, 68% of Canadians have had to dip into emergency funds due to an unexpected event. However, fewer than half of those were able to cover the full cost.

In light of this, HomeEquity Bank is excited to introduce a new product to its robust suite of Reverse Mortgage solutions, CHIP Open. CHIP Open is tailored to Canadian homeowners 55+ who are in need of short-term access to finance and have equity in their homes.

What is CHIP Open?

CHIP Open allows you to release up to 55% of the value of your home for short-term needs such as bridge financing or an investment property purchase. Its qualification criteria are tailor-made for retired Canadians – making it ideal for Canadian homeowners 55+ who may have been turned down for traditional loans.

In contrast with the CHIP Reverse Mortgage, which you may use for a longer-term need, CHIP Open gives you the flexibility to repay 100% of the balance at any time, with – most importantly – no prepayment penalties.

Additional benefits of choosing CHIP Open by HomeEquity Bank include the flexibility it allows. If you decide that you don’t want to pay off the loan in the short term, you can easily convert it to the CHIP Reverse Mortgage and defer any repayments until you sell your home or pass away.

What is CHIP Open for?

There are many situations in which CHIP Open may be the right solution for you.

Upgrading your home

Many people opt to renovate their home before putting it on the market in order to increase its desirability and assure maximum sales price. To pay for the renovations, you could take out the CHIP Open, which you can pay off when you sell your home at the increased value.

Bridge financing

Another reason you might opt for CHIP Open is to use it as bridge financing if you’re planning on moving. Perhaps you’ve found your dream home but aren’t yet in a position to sell your existing house – maybe you haven’t found a buyer yet or the buyer has fallen through. In this case, you could use CHIP Open as a bridging loan, using it to cover both your existing and your new home until you’re able to sell, before using the proceeds to pay off the CHIP Open Reverse Mortgage.

Helping out a loved one

The economic upheaval caused by the COVID-19 crisis has seen unemployment in Canada rise to 12%, with Millennials the worst affected group. It’s not surprising, therefore, that many Canadians 55+ want to help out their adult children financially.

In this situation, the parent could release cash from their home in order to provide support for their loved one until they get back on their feet. Once the child has a job again, they can pay back their parent who can then pay off the CHIP Open. Alternatively, if the adult child is not able to pay back the money, the loan can be converted to the CHIP Reverse Mortgage and treated as a pre-inheritance.

We never know when an unexpected event is going to crop up. And whether that event is an opportunity or a setback, it’s important to know what the best options are to access cash without negatively affecting your financial health.

If you want to know more about how CHIP Open may be the best short-term financing solution for you, contact your DLC Mortgage Broker who will work to create a customized mortgage solution for your specific financial needs.

*This post was written by Agostino Tuzi who is the National Partnership Director, Mortgage Brokers at HomeEquity Bank.

According to a study by Finder.com, 67.7% of Canadian parents assist their adult children financially. This may include helping them with rent (29.3%), handing out cash (38%), or contributing to larger purchases such as a down payment on a house (21%). Another reason why you may be helping out family members right now is the financial strain brought on by the COVID-19 pandemic.

The pandemic has disproportionately affected millennials, with 76% feeling the squeeze due to a reduction in working hours or job losses. Despite the fact that you may be in a better financial situation than other family members, it’s important to consider your options when looking to financially help your family – so you won’t jeopardize your retirement in the process.

HOW CAN I FREE UP FUNDS WITHOUT PAYING A PRICE?

There are many avenues you may explore in order to access the cash you need to help out adult children or other family members.

Withdrawing from savings:

The easiest and most straightforward option may be to withdraw from retirement savings. However, be aware that reducing your savings may have a negative impact on your future retirement income. There’s also the possibility that it’ll trigger capital gains and withdrawal tax, as well as OAS clawback.

Sell off assets:

Another option is to cash in on investments, although considering the economic upheaval of the pandemic, now may not be the best time to liquidate assets. Meanwhile, cashing in will eliminate investments from your portfolio unnecessarily, as well as triggering taxes and OAS clawback.

Draw on lines of credit:

An alternative is to turn to existing lines of credit such as home equity lines of credit (HELOCs) or credit cards in order to help out family members. If you’re able to get approval for a HELOC, it can be a strong option as the interest rate is lower than for most other loans. However, banks are currently approving far fewer than before in an attempt to protect themselves from the economic effects of the pandemic – retirees without a steady income are particularly susceptible to having their HELOCs denied. Something else to consider with most lines of credit is the need to make monthly loan repayments, which can put additional pressure on your retirement income. Credit cards are another loan option; however, these have among the highest interest rates of all and can quickly lead borrowers into a cycle of debt.

Explore a different option:

If none of these options are for you, there’s another option that’s often overlooked. The CHIP Reverse Mortgage from HomeEquity Bank allows you to borrow up to 55% of the value of your home while continuing to live there. The CHIP Reverse Mortgage is made specifically for Canadians 55+, with an approval process that doesn’t penalize you for being retired or approaching retirement.

Furthermore, you don’t have to pay what you owe until you no longer live in your home, meaning no stressful monthly repayments affecting your cashflow. And depending on what you need the money for, you can opt to have it in monthly payments or as a lump sum. Finally, some clients are concerned that they may end up owing more than their house is worth, however, with HomeEquity Bank’s No Negative Equity Guarantee, you’ll never owe more than your home is worth.

Financially assisting family members is something that generous Canadians have been doing for a long time. However, COVID-19 means that many people need to help out their loved ones more than ever. By carefully thinking through your options and deciding what’s right for you, you can give your family financial support without jeopardizing your retirement.

Contact me today to find out more about how the CHIP Reverse Mortgage can help you support your family during this time. 250-661-5462 or email me at adrienne@adriennejopp@yahoo.ca

*This post was written by Agostino Tuzi
Agostino Tuzi is the National Partnership Director, Mortgage Brokers at HomeEquity Bank