Mortgage · FSRA #13463- Home
- Reverse Mortgages
The complete plain English explanation
How reverse mortgages work in Canada
Everything on this page is the same information I'd give you across your kitchen table: what a reverse mortgage is, what it costs, how the numbers behave over time, and, just as important, when you shouldn't get one.
Do you qualify, and for how much?
The basics are simple. You may qualify if:
- Everyone on the home's title is 55 or older
- The home is your principal residence (you live there most of the year)
- The home has meaningful equity (it doesn't need to be fully paid off, many people use a reverse mortgage to retire an existing mortgage and end the monthly payments)
How much you can access depends mostly on your age. As a rough guide for Ontario homes:
| Age of youngest owner | Typical share of home value | On a $900,000 home |
|---|---|---|
| 55–64 | Roughly 20–35% | ≈ $180,000–$315,000 |
| 65–74 | Roughly 35–45% | ≈ $315,000–$405,000 |
| 75+ | Up to about 55% | ≈ $495,000 |
Illustration only. Actual amounts depend on your age, property type, location, and lender qualification, and are never guaranteed. The only way to know your number is a lender assessment, which I can arrange at no cost.
Who actually lends the money
Reverse mortgages in Canada come from federally regulated lenders, not from me and not from numbered companies. The market has grown to roughly five lenders; these three are the largest, and where most of my clients land:
HomeEquity Bank
The CHIP Reverse Mortgage, Canada's oldest and largest reverse mortgage lender, operating since 1986.
Equitable Bank
The Flex Reverse Mortgage, a Schedule I Canadian bank, often competitive on rates and prepayment flexibility.
Bloom Financial
A newer Canadian lender with a streamlined process and its own home equity guarantee.
Newer entrants, including Home Trust, have also brought equity-release options to the market. My role as a licensed agent is to compare the whole market for your situation; a bank branch can only show you its own product. You don't pay me a fee for arranging a reverse mortgage: the lender pays the brokerage, and I'll always disclose exactly how that works.
You may see "HECM" mentioned on American websites, that's a US government program with completely different rules. It does not exist in Canada, and any Canadian site quoting HECM rules is a red flag.
What it costs, real numbers
Costs vary a little by lender, but the structure is similar, and everything can come out of the proceeds so there's nothing to pay up front:
| Item | Typical range |
|---|---|
| Property appraisal | $300–$600 (some lenders cover it if you proceed) |
| Lender setup / legal fee | $1,500–$2,500 (deducted from your funds) |
| Independent legal advice (your own lawyer) | $300–$700 |
The bigger cost is interest. Reverse mortgage rates run higher than regular mortgage rates, usually by roughly one to two percentage points, because the lender waits years to be repaid. Since you're not making payments, the interest compounds: the balance grows over time and the equity left over shrinks. Anyone who glosses over this isn't being straight with you. The free guide includes a year-by-year example so you can see exactly how a balance grows.
What happens at the end
The loan is repaid when one of three things happens:
- You sell your home. The loan is paid from the sale proceeds and every remaining dollar is yours.
- You move out permanently: for example into a retirement residence or long-term care. If your spouse is on the loan and still lives in the home, nothing changes. Otherwise the home is sold and the loan is repaid from the sale proceeds; lenders allow a reasonable period to arrange the sale, so nobody is rushed to market.
- You pass away. Your estate repays the loan, usually by selling the home, and the remaining equity goes to your beneficiaries as usual. Family members who want to keep the property can repay the loan with financing of their own instead. Your family is given time to settle things properly, typically around six months, and lenders work with estates on timing. Your children never inherit a personal debt: the no-negative-equity guarantee offered by Canada's reverse mortgage lenders means the amount owing can't exceed the fair market value of the home when it's sold, provided the loan obligations were met.
If one spouse passes away, the surviving spouse (if on the loan) simply stays in the home under the same terms. Nothing changes.
When to think twice
I mean this sincerely: for some of the people who ask me, the honest answer is no. Here's what makes me pause, and what we'd check together:
- If you comfortably qualify for a HELOC and genuinely don't mind monthly payments: it can be cheaper money. Rates on both products vary and are sometimes closer than you'd expect, so we compare real numbers rather than assume. That said, plenty of people who could get a HELOC still choose a reverse mortgage, because no payments, no income re-qualification, and no risk of the line being frozen matter more to them.
- If you're planning to move soon: we look harder at the math, because setup costs are easier to justify over years than months. Moving plans no longer rule it out automatically, though: some lenders offer portable options (Bloom, for example, has a reverse mortgage designed to move with you), so it's a conversation, not a closed door.
- If your single highest priority is maximizing what you leave behind: compounding interest works against that goal, and you should see the projection before deciding.
- If the home is already stretched thin: with little equity or ongoing costs you can't sustain, a hard look at selling may serve you better, and I'll help you think it through.
The guide has a full comparison of reverse mortgage vs. HELOC vs. refinancing vs. downsizing, and the self-assessment will give you an honest read in about three minutes.
Common questions about the mechanics
How much can I borrow?
Typically between roughly 20% and 55% of your home's appraised value, depending mainly on your age, your property, and the lender. Older borrowers qualify for more. The exact figure always comes from a lender assessment of your specific home, anyone quoting you a guaranteed number without one is guessing.
Can I pay it off early?
Yes, at any time. Prepayment charges may apply in the early years and typically shrink over time; most lenders reduce or waive them on death or a move to long-term care. You can also choose to pay the interest as you go, which keeps the balance from growing at all.
Is the money taxable? Will it affect my OAS or GIS?
No, it's borrowed money, not income, so it isn't taxed and doesn't by itself reduce income-tested benefits like OAS or GIS. How you hold the money can matter (for example, interest earned on it in a savings account is taxable), so check your specifics with an independent advisor.
What are my ongoing obligations?
Three things: live in the home as your principal residence, keep property taxes and insurance paid, and keep the home reasonably maintained. Do those and the loan can't be called while you're living there.
How do I receive the money?
Your choice: a single lump sum, scheduled advances (like a monthly top-up to your income), or a combination. You only pay interest on what you've actually taken, so many people take less up front and draw more later if needed.
Want your actual numbers?
A 15 to 30 minute call costs nothing and commits you to nothing. I'll tell you what you could access, what it would cost, and whether I think it's a good idea for you, even if the honest answer is no.