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A unique strategy for accessing additional money
 By the time you retire your home is a substantial asset in your financial portfolio. And it’s an asset that can easily be put to work wisely elsewhere in your retirement plans to help you preserve your other investments, help with current cash flow, and may even help you reduce the taxes you pay.
Canadian Home Income Plan (CHIP) Reverse Mortgage offers you the opportunity to convert a portion of your home equity into tax-free money without giving up the comfort of living in your own home.
How it works
- Homeowners 62 and older may qualify for $20,000 to $500,000 in tax-free money from their home’s equity.
- The specific amount you may qualify for is 10% to 40% of your home’s current appraised value, based on your age and that of your spouse, and on the location and type of home you own.
- No payment is required while you or your spouse continues living in your home.
- Home ownership remains in your control.
- You have the option to pay accumulated interest annually.
Potential tax advantages
- Reverse mortgage proceeds are received tax-free, like any other loan, and are not added to your taxable income.
- If the interest on the reverse mortgage is paid annually, this interest may be deductible if investments were purchased with the reverse mortgage proceeds. If the interest is not paid annually, then speak to a qualified tax advisor regarding the deductibility of the accrued interest when investments are purchased.
- Accessing money from your home equity allows you to help preserve your other investments.
- Reverse mortgage proceeds will not affect your eligibility for government benefits.
Financial freedom
- There are no restrictions on how you choose to use the money from your reverse mortgage, with one exception. Any outstanding loans secured by your home or other home-related debts must be retired with the reverse mortgage proceeds, i.e. another mortgage or a secured line of credit. Thereby freeing up some of your monthly budget.
- The extra money can help take the pressure off managing your expenses today, as well as the inevitable increases that will come tomorrow.
Protection of home ownership
- You have complete freedom to sell your home or move at any time.
- Homeowners will not be asked to move or sell to repay the loan. Like other mortgages, up-to-date payment of property taxes, fire insurance, condominium/maintenance fees, and maintenance of the property is required.
Payment
- No payment is required while you or your spouse continues living in your home.
- The full amount only becomes due upon the death of the last surviving spouse, or when your home is sold.
- You have the option to repay in full at any time. (Prior to 36 months, a pre-payment fee applies. After 36 months, an interest rate differential payment may be applicable.)
- You have the option to pay accumulated interest annually on the mortgage anniversary date or, if you live in Quebec, on the interest re-set date.
Impact on your estate
- Upon the death of the last surviving spouse, the loan amount to be repaid is guaranteed not to exceed the fair resale value of your home at the time it is sold, protecting the balance of your estate.
- After the loan is repaid, your estate retains any remaining proceeds from the sale of the home.
If you’d like to know more about how you might be able to take advantage of the equity in your home, click here to find the RBC financial planning professional closest to you or go to Canadian Home Income Plan (CHIP).
Important information about our financial planning services can be found at the bottom of our
homepage.
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