Unlocking the potential: Using the CHIP Reverse Mortgage to purchase a second property

This article was produced in partnership with HomeEquity Bank.

The concept of wealth building has evolved over the years, and Canadians are continually looking for innovative ways to make their money work for them. One avenue that has gained significant attention is the utilization of the CHIP Reverse Mortgage by HomeEquity Bank to purchase a second property. This financial tool, previously associated primarily with retirement planning, is now an attractive option for those looking to expand their real estate portfolio and enhance their overall wealth.

Available to Canadians 55 or better, the CHIP Reverse Mortgage allows homeowners to convert a portion of their home equity into tax-free cash without having to sell their property or make any mortgage payments. This flexible financial product has traditionally been employed to supplement retirement income or cover unexpected expenses. However, astute investors have begun recognizing the potential of leveraging the CHIP Reverse Mortgage to acquire a second property.

Financial flexibility

One of the key advantages of using the CHIP Reverse Mortgage for purchasing a second property is eliminating the need for substantial upfront capital. By tapping into the equity of their primary residence, individuals can access a significant amount of tax-free funds to invest in a second property. This means that even if their retirement savings are limited, they can still participate in the real estate market and diversify their investment portfolio.

Another enticing aspect of using the CHIP Reverse Mortgage for purchasing a second property is the potential for rental income. The acquired property can be rented out, generating a steady stream of cashflow to cover the mortgage interest and maintenance costs, and potentially yield a profit. As rental income continues to flow in, homeowners can pay down the reverse mortgage balance, further increasing their overall net worth. Moreover, real estate has long been recognized as a reliable long-term investment with the potential for capital appreciation. By purchasing a second property through the CHIP Reverse Mortgage, individuals can benefit from the potential appreciation of the property over time. As the property value increases, so does the homeowner's overall wealth. This growth can be especially advantageous when planning for future financial goals or leaving a legacy for loved ones.

Home improvements and taxes

A cottage in the country or a home on a lake can often use a little updating. The CHIP Reverse Mortgage can also help here, providing additional funds for renovations so that the property perfectly fits the new owner’s needs.

Since the funds received from the CHIP Reverse Mortgage are also tax free,  the full amount can be applied to the purchase of the second home without worrying about tax implications. This feature can help alleviate the financial and bureaucratic challenges associated with purchasing a second property.

Peter considers a second home

Let’s look at an example of how the CHIP Reverse Mortgage might work:

Peter is a retired widower with a $1.3 million family home in Toronto. He has always dreamed of a vacation home where he could enjoy the outdoors with his family. By using some of his retirement savings, along with the CHIP Reverse Mortgage taken out on his home, Peter can unlock $715,000 to help buy a beautiful lakeside retreat just three hours away. He now has a dream vacation home to share with his family without negatively impacting his retirement income. This second home is now a valuable opportunity for family and friends to strengthen their relationships and create lasting memories.

The CHIP Reverse Mortgage by HomeEquity Bank provides several financial and social benefits for retirees. The flexibility, absence of monthly payments, tax-free funds, and homeownership retention make it an attractive option for individuals looking to expand their real estate investments or create a space for family and friends.

To learn more about how the CHIP Reverse Mortgage can help your clients purchase their dream property and make their getaway a reality, visit us online or contact a Business Development Manager today.