Six communities on Vancouver Island have the most senior populations in Canada, which according to Statistics Canada is because the Island has so many popular destinations for seniors wishing to retire. Parksville, Qualicum Beach, Sidney, Nanaimo-Ladysmith, Nanaimo-Nanoose Bay, and the Southern Gulf Islands are not only beautiful and vibrant communities to live in, but they also have some of the mildest climates in Canada. With thousands of people wishing to relocate to Vancouver Island each year, and Nanaimo’s largest population being seniors over 65 years of age, it is reasonable to believe many among this age group are homeowners who are relocating or looking to downsize.
Moving into a new home always brings challenges, but for senior home buyers, it can be extremely overwhelming and stressful. Maybe you are aged 55+ and have found your next home but need more time before selling your existing home. Perhaps you want to work on your current home to attract a higher price. Or maybe you want extra time to manage the move and reduce the stress of uprooting your lives. As your Mortgage Broker, we can strategically work with you and your Realtor to set closing dates that allow you to transition into your new home at your own pace.
Drawbacks of traditional bridge loans
Traditional bridge financing is a short-term loan that allows clients to put a substantial down payment on their new home before selling their old home. A bridge loan can be very helpful for many in this scenario, however, you may be required to provide proof of income to obtain the bridge loan or potentially pay much higher interest rates and closing costs using private lenders. This can be challenging if you are retired, and cash flow is an issue. This is where a Reverse Mortgage comes in.
Reverse Mortgage CHIP Open: A bridge financing solution for homeowners 55+
Consider the case of a couple in their late-60s who own a large home in the Nanoose suburbs outside of Nanaimo, BC worth $1.5 million. The property is getting harder to maintain, so they want to sell it and purchase a condo closer to family and amenities like shopping, dining, walking paths, and healthcare providers. But they want to do some work on the property before putting it up for sale. In the meantime, they came across their dream condo listed at $450,000.
The problem with this is many lenders, including their bank they have used for years, won’t approve them for a mortgage because their income consists of smaller government pensions and some retirement savings – a common situation today.
That’s why CHIP Open by Home Equity Bank is such a great solution. CHIP Open is a reverse mortgage product designed for short-term financing solutions like the scenario discussed above. It allows clients to access the equity in their homes and turn it into tax-free cash. Since clients are accessing home equity, there are no income requirements. Plus, there are no required monthly mortgage payments, which frees up their cashflow for other expenses.
With CHIP Open, the couple in our scenario could access the $450,000 needed to purchase their condo while they maximize the value of their current property. After they sell the property, they can repay the full amount on CHIP Open without any prepayment penalties.
Strategic uses of CHIP Open
The luxury of time: You can take your time selling your existing home, making the process of moving much more comfortable.
Flexible closing dates: You can purchase your new home and sell your current home with flexible dates, increasing your chances of attracting higher offers.
Flexible Solution: With no monthly mortgage payments to make, you don’t have to accept the first offer on the home you are selling. You have the flexibility to wait things out and maximize the sale price. Should the market take a major downturn and you cannot sell, you can convert CHIP Open to the standard CHIP Reverse Mortgage and wait to sell until the market picks back up.
No debt servicing: Many of our retired clients might face challenges in qualifying for a mortgage to purchase their next home before selling their current home. CHIP Open makes this scenario attainable, enabling a smooth transition to the next chapter of your lives.
Ultimately, the best decision you can do is contact your Mortgage Advisor to discuss all options regarding your home buying goals. We will provide you with a transparent approach to help navigate the world of mortgages and ensure you are making the best financial decision for your lifestyle, while getting you into the home of your dreams at the same time.