LAST UPDATED: March 20, 2025

The rising cost of living and weak Canadian dollar have led many snowbirds to seek out new solutions to help fund their snowbird lifestyles.

Even snowbirds who may not require additional funds to pay for their snowbird lifestyle often seek out ways to access additional capital for other purposes, like providing financial assistance to children and grandchildren for their education or downpayment of a home.

One funding option that has been growing in popularity among snowbirds is reverse mortgages, which can offer some advantages over other funding options such as traditional mortgages, Home Equity Lines of Credit (HELOCs) and selling investments.

Snowbird Advisor has partnered with HomeEquity Bank, provider of the CHIP Reverse Mortgage, to provide exclusive offers for Snowbird Advisor members who wish to explore reverse mortgages.

To help our members better understand this unique solution, we’ve created the following article on the CHIP Reverse Mortgage for Canadian snowbirds. It helps explain how these reverse mortgages works, the potential advantages over other ways of accessing capital and dispels some common myths.

What is a CHIP Reverse Mortgage?

A CHIP Reverse Mortgage is a financial product designed for Canadian homeowners aged 55 and older, allowing them to access up to 55% of their home's appraised value in tax-free cash without the need to sell their property or make regular mortgage payments. A CHIP Reverse Mortgage also does not impact a retired persons Old Age Security (OAS) or Canadian Pension Plan (CPP). 

The loan is secured against the value of the home and is repaid when the homeowner sells the house, moves out, or passes away. 

Throughout the term of the reverse mortgage, the homeowner retains full ownership and control of their home.

Reverse mortgages are an ideal solution for snowbirds, providing financial flexibility during retirement and access to capital to fund their snowbird lifestyle and other financial goals.

What are the Key Features of a Reverse Mortgage?

• Access to Home Equity: Borrow up to 55% of your home's appraised value as tax-free cash.
• Simple Application Process: Applying for a reverse mortgage is less onerous than applying for a traditional mortgage or HELOC, as the amount you can borrow is based on the value and location of your home and the age of the homeowner(s) – not your income, assets and credit score.
• No Regular Payments Required: Unlike a mortgage or Home Equity Line of Credit, borrowers are not required to make regular payments. Repayment is only due when the homeowner sells the home, moves out, or passes away. If they so desire, borrowers do have the option to make principal and interest payments in the amount, and at the times, of their choosing.
• No need to reapply or requalify: Unlike a traditional mortgage, reverse mortgages don’t expire after a fixed term, so you won’t need to reapply or requalify.
• Retain Home Ownership: You maintain title and ownership of your home.
• Non-Recourse Loan: Homeowners or their heirs will never owe more than the fair market value of the home at the time it is sold.
• Tax-Free Funds: The money received from a reverse mortgage is tax-free and does not affect government benefits such as Old Age Security (OAS) or the Guaranteed Income Supplement (GIS).
• Flexible Disbursement Options: Funds can be received as a lump sum or in periodic or regular installments, depending on the homeowner's preference.

How Does a Reverse Mortgage Work?

In Canada, reverse mortgages are secured loans against the appraised value of a homeowner's primary residence. The amount available to borrow depends on factors such as the homeowner's age and the home's appraised value, location, and type. 

And if the value of your home increases over time, you may be eligible to borrow additional funds based on the increased value.

Homeowners can choose to receive the funds as a lump sum or in periodic advances, providing flexibility to meet various financial needs.

Importantly, borrowers retain ownership and title of their home and are not required to make regular mortgage payments. Repayment of the loan, including principal and accumulated interest, is only due when the homeowner decides to sell, moves out permanently, or passes away.

To obtain a reverse mortgage in Canada, homeowners must meet specific eligibility criteria:

• Age Requirement: Applicants must be at least 55 years old.
• Primary Residence: The property must be the homeowner's primary residence. However, borrowers also have the option to include a second and third Canadian property in the CHIP Reverse Mortgage to increase the amount of capital available. Cottages are eligible for the CHIP Reverse Mortgage if it is (a) your primary residence, or (b) included as a second or third property under your primary residence.
• Location: The properties must be located in Canada.

Who Does a Reverse Mortgage Work Best For?

Reverse mortgages are particularly beneficial for Canadian homeowners aged 55 and over who wish to access their home equity without selling their property or the obligation to make regular mortgage or home equity loan payments. 

A CHIP Reverse Mortgage can be used by individuals looking to consolidate and pay off their debts, as well as those who are financially secure and do not want to trigger a taxable event by selling some of their investment portfolios. 

Common Uses of the Proceeds from a Reverse Mortgage

This financial tool is ideal for snowbirds looking to fund the following activities, providing a means to enhance cash flow while allowing you to age in place and maintain ownership of your home:

• Funding Your Snowbird Lifestyle: Cover expenses related to your snowbird lifestyle such as travel, rent, dining, activities or property maintenance costs when you’re away for the winter.
• Supplementing Retirement Income: Enhance your monthly cash flow to maintain or improve your standard of living.
• Buying a Vacation Property: Purchase a vacation property in your snowbird destination.
• Home Renovations: Upgrade or modify your primary home, cottage or vacation property in your snowbird destination to better suit your needs.
• Assisting Family Members: Provide financial support to children or grandchildren, such as helping with education costs or home purchases.
• Medical Expenses: Cover healthcare costs not covered by insurance.

It's essential for potential borrowers to assess their financial situation, future plans, and discuss with financial advisors to determine if a reverse mortgage aligns with their long-term goals.

Advantages of a Reverse Mortgage vs. Other Options to Access Capital

Reverse mortgages can provide a number of advantages over other options for accessing capital, such as traditional mortgages, HELOCs and selling investments. Some of these advantages are outlined below:

Traditional Mortgages

• Regular Payment Obligations: Traditional mortgages require regular monthly interest and principal payments, which can strain fixed retirement incomes. In contrast, reverse mortgages do not require any regular payments, as repayment of principal and interest is deferred until the homeowner sells, moves out or passes away.
• Risk of Foreclosure: Missing regular mortgage payments can lead to foreclosure. Reverse mortgages eliminate this risk as there are no monthly payments required.
• Need to Requalify and Refinance: Traditional mortgages only last for a fixed period of time (i.e. 1, 3 or 5 years) after which homeowners may need to reapply and requalify for a new mortgage. However, reverse mortgages do not expire after a fixed period, so you won’t have to reapply or requalify.
• More Stringent Qualification Criteria: Qualifying for a traditional mortgage often involves stringent income, asset and credit assessments, which may be challenging for retirees. Reverse mortgages, on the other hand, have more lenient qualification criteria, focusing primarily on the homeowner's age and property value, rather than the income, assets and credit of the borrower.

Home Equity Line of Credit (HELOC)

• Interest Payment Obligations: HELOCs require regular interest payments, impacting monthly cash flow. Reverse mortgages eliminate this obligation, as interest payments are deferred until the home is sold or the homeowner moves out or passes away.
• Risk of Foreclosure: Missing HELOC interest payments can lead to foreclosure. Reverse mortgages eliminate this risk as there are no monthly payments required.
• Income Requirements to Qualify: HELOCs necessitate proof of sufficient income to cover interest payments, which can be a hurdle for retirees. Reverse mortgages do not have this requirement.

Selling Your Investments

• Tax Implications: Liquidating investments can trigger taxable events, such as capital gains taxes, that may increase your tax liability and reduce the portfolio's earning potential. Funds from a reverse mortgage are tax-free and allow investments to remain intact, allowing for potential future growth.
• Market Timing Risks: Selling investments may force you to realize losses, especially during market downturns. A reverse mortgage provides funds without depending on market conditions allowing you to preserve your investment portfolio and providing time for potential market recovery.

Each option for accessing funds has its own set of advantages and considerations. Homeowners should evaluate their financial needs, risk tolerance, and long-term goals, possibly in consultation with a financial advisor, to determine the most suitable option.

Common Myths and Misconceptions About the CHIP Reverse Mortgage

Several myths surround the CHIP Reverse Mortgage, but here are some important facts to help clear up common misconceptions:

1. Myth: You no longer own your home

   Fact: Homeowners retain ownership and title of their home. The lender only has a claim to the loan amount plus interest, which is repaid when the home is sold or the homeowner moves out or passes away. 

2. Myth: You can be forced to move out of your home
   
   Fact: As long as you maintain the property, pay property taxes and insurance, and continue to live in the home, you cannot be forced to sell or move.
3. Myth: High interest rates make reverse mortgages unaffordable
   
   Fact: While interest rates for reverse mortgages can be higher than traditional mortgages, they are often comparable to HELOC rates.

4. Myth: Your heirs will be saddled with debt

   Fact: Reverse mortgages are non-recourse loans, meaning neither the homeowner nor their heirs will owe more than the home's fair market value at the time of sale.

5. Myth: Reverse mortgages are a last-resort financial option
   
   Fact: Many Canadians use reverse mortgages as a strategic financial tool to enhance their retirement lifestyle, manage debt, or assist family members.

The Bottom Line on Reverse Mortgages

Reverse mortgages offer Canadian snowbirds age 55+ a viable option to access the equity in their homes without the need to sell or make regular payments. They provide financial flexibility, allowing homeowners to meet various needs during retirement while retaining ownership of their property. 

As with any financial product, it's essential to consider the associated costs and implications of reverse mortgages vs. other options for accessing funds such as traditional mortgages, HELOCs and selling investments. 

Consulting with a financial advisor can help determine if a reverse mortgage aligns with your financial goals and circumstances.

Exclusive CHIP Reverse Mortgage Offers for Snowbird Advisor Members

Snowbird Advisor has partnered with HomeEquity Bank to provide exclusive offers to Snowbird Advisor members who obtain a CHIP Reverse Mortgage, as well as personalized service to Snowbird Advisor members interested in learning more about reverse mortgages.

You can learn more about these exclusive offers and obtain a complimentary estimate on how much equity you can access here.