Income Advantage Plan
Income Advantage is a loan taken out against the value of your home. Income Advantage allows you to liquefy some of the value of your home, all without being forced to sell it and move out.
Financial Opportunity
There’s a huge portion of Canadian homeowners who are in a unique but challenging financial situation. For people 55 and over, many are quickly nearing or already in retirement, unable to return to work, and often financially limited because their current assets are expected to support them for the rest of their life. For some people, this arrangement works, but for many more, it’s not realistic.
For many people in this situation, they have one asset that makes up a large part, if not the majority of their net worth: their home. Unfortunately this isn’t always a simple solution, since many seniors would prefer to remain in their homes and their communities. Without going through the hassle of selling their home and downsizing to a less expensive property, it would seem that the value of one’s home is locked away.
However, thanks to a financial opportunity being discovered by more and more Canadians, that doesn’t have to be the case.
Introducing Income Advantage
Income Advantage provides flexibility and convenience thanks to the structure of payouts scheduled in advance, allowing you to plan further into the future thanks to the assurance of a steady stream of income.
People who sign on for an Income Advantage plan will suddenly have access to funds that they otherwise wouldn’t, all while remaining a part of their community thanks to not having to downsize their home. People on Income Advantage can use this new income to cover all kinds of costs, including:
Paying off debts
Covering unexpected and emergency expenses
Home renovations and improvements
Financially assisting loved ones
Travelling
Purchasing other properties
Simply enjoying a worry-free retirement
Income Advantage can be an absolute game-changer for people who qualify. Rather than being forced to choose between their homes and financial security, this product allows people entering retirement to have the best of both worlds. With all this in mind, you’re probably wondering exactly how Income Advantage works
How does it work?
Any Canadian over the age of 55 who owns their home is eligible for Income Advantage. By allowing people to access part of the value of their home immediately without selling it, they’re able to gain financial freedom and flexibility. It all begins with an initial consultation, where a broker will assess the market value of your home with all outstanding debts subtracted from this total. Provided the home is eligible, you’ll be able to set up your Income Advantage plan.
Homeowners are eligible for a loan of up to 55% of the value of their home, and you’ll also have options on how that amount is paid out. You’ll be paid out an initial advance that’s proportionate to the total loan, and from there you can choose whether to receive further payments on either a monthly or quarterly basis.
The advantage of this model versus one where you can receive any amount of the loan at your own discretion is that Income Advantage acts as a source of steady, long-term income. This allows you to get a clear sense of your financial future and plan around each advance, giving you peace of mind as you budget for planned (and unplanned) expenses.
Once your Income Advantage plan is all set up, it couldn’t be simpler. All you need to do is maintain your home as you normally would. This means keeping up-to-date on property taxes, home insurance, and any other fees your home is normally subject to, as well as simply maintaining the property to keep it in good condition. Beyond that, it’s up to you how you spend your new source of income and enjoy your retirement.
Income Advantage VS. CHIP Reverse Mortgage
With so many options for homeowners above the age of 55 looking to take advantage of their most valuable asset, it can be tough to decide which option is the best for you. Two of the most commonly confused financial products available are CHIP Reverse Mortgages and Income Advantage plans.
A qualified mortgage broker will be able to walk you through each aspect of the various options available, but here’s a quick rundown of the similarities and differences so you can begin to make your decision.
Similarities
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1. Maximum Loan-to-Value (LTV)
Loan-to-Value, or LTV, is a ratio that refers to the amount that is loaned to a person versus the value of the asset they’re loaned against. This is a way for lenders to determine the relationship between how much they’re lending out compared to the market value of the secured asset in question, in this case, your house. In both Income Advantage plans and CHIP reverse mortgages, the maximum LTV is 55%, meaning you’re eligible to receive up to 55% of the value of your house in a loan via either service.
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2. Turning your home’s equity into accessible funds
In the case of both CHIP Reverse Mortgages and Income Advantage, the main benefit is allowing people to access money from something that otherwise wouldn’t provide any. Your home is a valuable asset, but that’s normally only the case if it’s for sale. With these two financial services, you can leverage the market value of your house in order to gain access to unrestricted liquid equity.
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3. Providing freedom for people entering retirement
Both Reverse Mortgages and Income Advantage loans allow older Canadians to experience new financial freedom and flexibility without a drastic change to their lifestyle. People entering retirement can enjoy increased financial options, allowing them to spend money on what’s most important to them without having to be uprooted from their environments. This benefit is absolutely unmatched, and is one of the greatest selling points of these financial products.
Differences
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1. Payout plans and minimum initial advances
One of the main differences between Reverse Mortgages and Income Advantage loans is the way payouts are structured. Where Reverse Mortgages allow clients to receive a one time, pre-planned lump sum payment, Income Advantage provides a little more structure. With Income Advantage, you can count on regular, scheduled payouts acting as a source of either monthly or quarterly income, allowing you to plan finances, budget, and save just as you would if you were still working.
Additionally, the minimum initial advance differs slightly between these two services, with CHIP Reverse Mortgages requiring a minimum first payment of $25,000, and Income Advantage plans requiring a slightly lower minimum of $20,000.
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2. Minimum monthly advances
Because of the different payout system for Income Advantage, there’s another difference when it comes to advances. Since there is only one initial advance with Reverse Mortgages the amount of the advance is only restricted by how much you qualify for. Because Income Advantage loans allow a more structured income plan, each advance is subject to a monthly minimum of $1000, or a quarterly minimum of $4000.
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3. Closing fees
Income Advantage loans and CHIP Reverse Mortgages both allow people to pay the loan off early and get out of it whenever they like. In both cases, all this requires is to pay off the principal sum and any interest accrued, as well as a small closing fee for early repayment. Exact amounts may differ slightly from broker to broker, but generally the closing fee for CHIP Reverse Mortgages is $1795, versus $2495 for Income Advantage loans.
FAQs
Each person’s specific financial situation is different, and there’s no better way to answer your exact questions than sitting down with a qualified broker to discuss your options. With that said, there are a few questions about Income Advantage loans that come up time and time again, including:
How do I know if I qualify for Income Advantage?
If you’re a Canadian citizen who owns their home, uses it as your primary residence, and if you (and your spouse) are over the age of 55, you’re eligible! There’s also no health evaluation or other restrictions, meaning that Income Advantage is an accessible option for almost everyone.
Do I have to pay tax on my Income Advantage payouts?
No. Because you’re releasing equity from your primary residence, it’s not considered taxable income, meaning that signing up for Income Advantage won’t affect your eligibility for government benefits (e.g. old age security, guaranteed income supplement).
Will my other assets be impacted when I repay my loan?
Income Advantage solely concerns your home, meaning all your other assets are protected when repaying the loan.
Will I wind up owing more than the value of my home?
In my many years of experience, I’ve found that the vast, vast majority (around 99%) of homeowners have equity leftover on their home after repaying their Income Advantage loan, all of which is theirs to keep. The exact amount of leftover equity varies depending on the home’s value at the time of repayment, and the time taken since initially taking out the loan.
Am I signing my home over to the bank?
The bank doesn’t own your home when you take out an Income Advantage loan. You maintain title, ownership, and control over the property, and simply need to maintain it as you normally would.
How do I get started with Income Advantage?
If you’re interested in accessing part of the money stored in your home, and have more questions about which financial product is most suited for you, I can help. I have over twenty years of experience in the BC mortgage broker industry, and in that time I’ve learned how to best assist my clients as they make these big decisions.
There’s nothing more important to me than providing a top quality service and helping clients to act with confidence, which is why I always take care to make the sometimes confusing world of loans and mortgages as simple as possible.