By Laura Urmoneit
The Canadian Home Income Plan (CHIP) and Bank of Montreal have formed an alliance to make residential reverse mortgages available to Canadian seniors, aged 62 and up.
“I’m hoping it will help us provide a valuable service to one of our most important customer segments which is the senior segment,” says Julie Sheen, vice president Bank of Montreal term investments. More than a niche product, she says the reverse mortgage is fairly unique in the marketplace. It offers a good opportunity for seniors to maintain lifestyle supplement income and not worry about debt repayment.
“We see it as a good product. One of the reasons why we got into this product was that as the CHIP commenced to roll out nationally, we started to get questions about it from our customers,” says Sheen.
The reverse mortgage offered through the BMO and CHIP alliance enable seniors to access up to 40% of the appraised value of their home. Repayments on the principal are not required during the lifetime of the homeowner. The principal and interest are repaid by the estate or if the owners sell their home.
“You’re taking the equity out of your home. You don’t have to worry about debt repayment and that’s very significant. Even if the house falls in value to the extent that the loan cannot be fully repaid, there’s no recourse back to the [homeowner] that’s a risk that CHIP assumes,” says Sheen.