CHIP’s variable rate used to be 4.95%. Now it’s just 3.75%.
Rates on CHIP’s fixed terms have gone down as well—from 0.70% to 1.00%.
The reductions are due largely to HomEquity’s recent bank status. Arthur Krzycki Director, Marketing & Public Relations, says: “By Becoming a Schedule I Bank, HomEquity Bank has diversified its funding strategy and lowered its cost of borrowing.”
Krzycki says, “Access to retail deposits in the form of GICs is a significant advantage to the organization.”
That said, it’s interesting that CHIP cut rates so much. It didn’t have to. Currently CHIP has no direct competition in Canada. It’s biggest threat was Seniors Money, but Seniors stopped lending in Q2 2008. (Although, Seniors Money may be back by the new year–or soon thereafter, according to a source at the company.)
CHIP also competes with line of credit (LOC) providers, but the company says LOCs are more of a short-term solution. Krzycki says CHIP has an advantage because borrowers don’t need any income, don’t need good credit, and don’t have to make any payments until they sell their home.
CHIP even has an option whereby they’ll discount your rate ½% if you pay your interest in full each year. That puts the rate at 3.25% currently–the same rate as most secured HELOCs.
With 38.5% of Canadian wealth tied up in home equity, and an aging population, reverse mortgage popularity will only grow. In fact, for senior citizens, the wealth statistics are even more compelling. Gary Krikler, Chief Financial Officer of HomeQ, told the Postmedia News that "77% of senior net worth is in home equity, and 17% view their home as their retirement fund."
Other miscellaneous facts about CHIP:
You can receive your money in one lump sum or periodically (e.g., monthly, quarterly, etc.).
Closing, legal and administrative costs on CHIP reverse mortgages are set at $1,495.
Stock in CHIP’s parent, HOMEQ, is up 157% from its low last November.
HOMEQ recently announced a $200,000 loss, but President Steven Ranson says, "Our immediate goal is to build on the tremendous achievement of becoming a bank, and to return to the growth rate we enjoyed prior to the financial crisis."
Canada’s senior population could rise from 4.3 million in 2006 to 9.8 million in 2026, says CHIP.
If you’d like to know more about CHIP reverse mortgages, contact any mortgage planner, call CHIP, or jot us an email.