Tapping into home equity to boost cashflow

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Do your clients need help meeting their retirement income needs? With inflation taking a bite out of savings, accessing cashflow can be a real challenge. That’s why many Canadians are turning to one of their biggest assets – their homes – to supplement their income in retirement. A home equity line of credit (HELOC) and a reverse mortgage are two of the most popular ways for Canadians to tap into their home equity and boost cashflow.

The benefits of a HELOC

With a HELOC, homeowners can access up to 65% of the value in their homes and are only charged interest on the amounts they draw from their credit line. Unlike a mortgage, there are no scheduled payments on the loan’s principal, and homeowners can pay off their line of credit when it’s convenient for them. However, they must make minimum monthly interest payments on any amounts drawn.

• HELOC rates are usually lower than other lines of credit because the loan is secured by your client’s home 
• Once approved for their HELOC,  clients can access cash as they need it
• When they start to pay down the principal, the amount they can borrow increases to their original credit limit, providing ongoing access to cashflow

The reverse mortgage advantage

The other way for homeowners to access the equity in their homes is through a reverse mortgage. The CHIP Reverse Mortgage by HomeEquity Bank allows Canadian homeowners age 55+ to access up to 55% of their home’s value and turn it into tax-free cash. Your clients can receive the funds from a reverse mortgage as a lump sum or in regular monthly deposits. Clients can use the money for any of their financial needs, including health care costs, debt consolidation or lifestyle expenses.

A big advantage of the CHIP Reverse Mortgage is that monthly mortgage payments are not required – the full amount of the loan only becomes due when clients move or sell their home or through their estate if they pass away. Some of the other benefits of a reverse mortgage include:

• No income requirements. Reverse mortgages are specifically designed for Canadians 55+ who may have difficulties qualifying for a HELOC and other loans. 
• No need to requalify. A regular HELOC from a bank may subject the borrower to credit score checks over time, which can affect their ability to access the line of credit down the road. 

Interest rates converging

Until recently, one of the major advantages of a HELOC compared to a reverse mortgage was its lower interest rate. At the end of last year, the average HELOC rate was about 2% less than the average reverse mortgage rate. But the difference today is slim. In fact, the CHIP Reverse Mortgage 5-year Special Rate was slightly lower than the average HELOC rate in early April 2023.

To learn more about helping your clients tap into their home equity with the CHIP Reverse Mortgage, visit us online or contact a Business Development Manager today.