Reverse Mortgages
The short version
A reverse mortgage lets homeowners aged 55 and over convert part of their home equity into tax free cash without selling and without making monthly payments. You keep title and you keep living there. Interest accrues onto the balance rather than being paid monthly, and the loan is settled when the home is eventually sold, when you move out permanently, or from the estate. In Canada you can generally access up to around fifty five percent of the home value, with the exact figure driven by your age, the property and its location. The money is not income, so it does not affect Old Age Security or the Guaranteed Income Supplement. It costs more than a conventional mortgage and the balance compounds, so it deserves a careful comparison against the alternatives. Approvals are on approved credit.
What it actually is, and what it is not
It is a mortgage. The lender registers a charge against your home, advances you money, and is repaid later. The two things that make it different from any other mortgage are that no monthly payment is required, and that the balance grows instead of shrinking.
What it is not: a sale of your home, a transfer of title, or the bank taking ownership. You remain the owner, you can sell whenever you like, and you keep any appreciation above the balance owing. That misconception is widespread enough that it stops people who would genuinely benefit from even asking.
Your obligations are to keep living there as your principal residence, keep the property in reasonable repair, and keep property taxes and insurance current. Fail those and the lender can call the loan, which is the same condition attached to any mortgage.
Who qualifies
- Age 55 or over. Every registered owner must meet the age requirement, not just one of you.
- The home is your principal residence. Lenders expect you to live there at least six months of the year. Rental and investment property does not qualify.
- Enough equity. Any existing mortgage must be paid out from the proceeds, so there has to be enough to clear it and leave something worthwhile.
- A minimum property value. Lenders set a floor, commonly around $250,000, below which they will not lend at all.
- An acceptable property. Most homes and condominiums in populated areas qualify. Rural acreage, mobile homes and unusual properties may not.
Income and credit matter far less than on a conventional mortgage, because there is no monthly payment to service. That is precisely why the product exists: retirees are frequently asset rich and income poor, which is exactly the profile a normal lender declines.
How much you can get
Up to fifty five percent of the appraised value. Treat that as a ceiling rather than an expectation, because most borrowers are offered less. Three things drive the actual number.
- Age. The older you are, the more you can access, because the lender expects a shorter term.
- The property and location. A condominium in a major centre supports more than a rural detached home.
- Existing debt. Anything registered against the home has to be cleared from the advance.
You can take it as a lump sum, as scheduled advances, or a combination. Scheduled advances usually cost you less overall, because interest only accrues on money you have actually received. If you do not need it all at once, do not take it all at once.
What it costs, honestly
The rate is higher than a conventional mortgage, and there are setup costs: an appraisal, independent legal advice, and a lender administration fee. We do not publish rate figures anywhere on this site, and we will set out the full cost in writing for your specific situation.
The cost that matters most is not the rate, though. It is compounding. With no payments being made, interest is added to the balance and then earns interest itself. Over a long enough period the balance can grow substantially, and it grows fastest in the later years.
Whether that matters depends entirely on your circumstances. If the home is appreciating at a similar pace, your equity may hold roughly steady. If leaving the property to your children is the priority, the arithmetic deserves real attention before you proceed. We will run it with you over a realistic time horizon rather than a flattering one.
When it genuinely fits
- You want to stay in your home and the alternative on the table is selling it.
- Your income will not support a conventional mortgage payment, which rules out a refinance or a line of credit.
- You need to clear debt that is consuming a fixed income, where removing the payments improves life immediately.
- You are funding care or home modifications that let you stay put longer.
- You want to help family now rather than through an estate, and the timing matters more than the total.
It fits poorly when the need is short term, when you are likely to move within a few years, or when the amount involved is small relative to the setup costs.
Alternatives worth weighing first
We would not be doing our job if we placed one of these without checking the cheaper options first.
- A home equity line of credit. Considerably cheaper, and you only pay interest on what you draw. It requires you to service the payments and to qualify, which is where many retirees come unstuck.
- A conventional refinance. Cheapest of all if your income supports it. Pension and investment income does count, and some lenders treat it more generously than others.
- Downsizing. Unpopular to raise and sometimes the right answer. It releases the full equity rather than half of it, and it removes the carrying costs entirely.
- A second mortgage. Fixed term borrowing against the equity, cheaper than a reverse mortgage, if payments are manageable.
If one of those works for you, take it. A reverse mortgage is the right answer when the others have genuinely been ruled out, and we will tell you which category you are in.
Have the conversation with your family
You are not obliged to, and it is your home and your decision. But the situations that go badly are almost always the ones where adult children discover the arrangement after a death, at the worst possible moment, and misunderstand what it was.
A short conversation beforehand prevents nearly all of that. Independent legal advice is required as part of the process anyway, which is a genuine protection rather than a formality. We are happy to walk through the numbers with your family present if that helps.
Common questions
Do I still own my home?
Yes. Title stays in your name and nothing about your ownership changes. This is the single most common misconception about the product. The lender registers a charge against the property in the same way any mortgage lender does, and that is the extent of it.
How much can I borrow?
Generally up to around fifty five percent of the home value, though the actual figure depends on your age, the type of property and where it is. The older you are, the higher the percentage, because the lender expects the loan to run for less time.
Do I have to make payments?
No regular payments are required, which is the point of the product. Interest accrues onto the balance instead. You can make voluntary payments if you want to slow that growth, and many people do once they see how compounding works over a long period.
Will I end up owing more than the house is worth?
The Canadian lenders offering these carry a no-negative-equity guarantee, so provided you have met your obligations, you or your estate will never owe more than the fair market value at the time it is settled. Confirm the exact wording with the lender before signing.
Does it affect my OAS or GIS?
No. The money is a loan rather than income, so it is not taxable and does not count toward income-tested benefits such as Old Age Security or the Guaranteed Income Supplement. That is one of the genuine advantages over drawing down a registered account.
What happens when I die or move out?
The loan becomes due. In practice the home is usually sold and the balance settled from the proceeds, with anything remaining going to the estate. Lenders allow a reasonable period for that to happen. Your family should know the arrangement exists before they need to deal with it.