Saturday, February 7, 2009


You have seen the ads "Wouldn't it be nice..."

These are ads for seniors to borrow money using their home as collateral. It is a loan.

I noticed in their ad the used phrases such as "receive tax free cash" or "home income plan" more often than "mortgage", "debt" and ""loan". So I had a look at their website.

On the front page there are the following terms:
"Home income plan"

"How much money could I

"The CHIP Home Income Plan allows you to
unlock the value in your home."

"how much of your home's value you can access and what the future equity of your home may be.

Unlock the value in your home and enjoy life on your terms."

Get up to 40% of the value in your home in tax-free cash with no payments required for as long as you live in your home."
to their credit "payments" were mentioned here - BearClaw
The word "debt" does appear on the front page
“We didn’t want to sell the family home where we’d raised our seven children. But we were short on cash for living expenses. With our CHIP Home Income Plan, our debts are gone and so is our stress!”
The information stating that this is a reverse mortgage is available on this site. I find it interesting that it is marketed as income and as accessing, getting and unlocking cash.

They also have a future equity calculator. The options available for yearly home appreciation are 2, 4 and 6%. The one selected by default is 4%. By estimating long term appreciation the mortgage amount can grow over time as no payments are made.

One example is a couple aged 70 can borrow $148,495 from their mortgage-free $500,000 home. When they are 90 they will owe $644,339 on their home which is estimated would be worth $1,095,562 (with the default 4% appreciation). The column showing outstanding mortgage balance is labeled "CHIP". The rightmost column is labeled "Net equity" and with this example reaches $451,223 at age 90.


BearClaw said...

There is another company offering this type of loan in Canada.

Seniors Money Canada

Their front page does mention "Reverse Mortgage" and "loan".

More interestingly there is this:

Due to current global economic conditions, Seniors Money Canada is currently not accepting new customers.

Carioca Canuck said...

Reverse mortgages should be illegal.