In a softer real estate market, savvy brokers will need to expand their product offerings to meet clients’ short-term and longer-term needs. Diversifying your lending portfolio with a broader suite of solutions can help you solve client pain points and uncover opportunities to grow your business.
For instance, you may have clients aged 55+ who have found their next home but need more time before selling their existing home. Perhaps they want to work on their current home to attract a higher price. Or maybe they want extra time to manage the move and reduce the stress of uprooting their lives.
Drawbacks of traditional bridge loans
Traditional bridge financing – a short-term loan that allows clients to put a substantial down payment on their new home before selling their old home – might seem like a good choice in scenarios like this. However, your clients may be required to provide proof of income to obtain the bridge loan or potentially pay much higher interest rates and closing costs using alternative lenders. This can be challenging if your clients are retired, and cashflow is an issue.
The good news is that there is a lending solution you can recommend to your retired clients to make the transition into their new home as seamless as possible before they sell their existing residence: CHIP Open by HomeEquity Bank.
CHIP Open: A bridge financing solution for homeowners 55+
Consider the case of a couple in their mid-70s who own a two-acre property worth $2 million. The property is getting harder to maintain, so they want to sell it and purchase a townhouse closer to the city. But they want to do some work on the property before putting it up for sale. In the meantime, they came across their dream townhouse listed at $650,000.
The problem is that their bank won’t approve them for a mortgage because their income consists of government pensions and some retirement savings – a common situation today.
That’s why CHIP Open by HomeEquity 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 $650,000 needed to purchase their townhouse 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
- CHIP Open can be used strategically by your clients to meet many different needs.
- The luxury of time. Clients can take their time selling their existing homes, making the process of moving much more comfortable.
- Flexible closing dates. Clients can purchase their new homes and sell their current homes with flexible dates, increasing their chances of attracting higher offers.
- Flexible Solution. With no monthly mortgage payments to make, your clients don’t have to accept the first offer on the home they are selling. They have the flexibility to wait things out and maximize the sale price. Should the market take a major downturn and they cannot sell, they can convert CHIP Open to the standard CHIP Reverse Mortgage and wait until the market picks up.
- No debt servicing. Many of your retired clients might face challenges in qualifying 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 clients’ lives.
Learn more about how CHIP Open can help meet the needs of your 55+ clients or contact a Business Development Manager today.
