Reverse mortgages in Canada, explained plainly

Eligibility and how much you can access

Everyone on title needs to be at least 55, and the home has to be your principal residence. Income and credit matter far less than with a regular mortgage. The lender is mainly looking at the home: its appraised value, type, condition and location, plus the age of the youngest borrower.

The ceiling is about 55% of the appraised value, and most people qualify for less. A 62-year-old with a condo in a smaller town will see a lower figure than a 78-year-old couple in a detached house in a major city. If you still have a mortgage or a secured line of credit, it is paid off first from the advance.

Under 55? A reverse mortgage isn't available, so look at taking equity out with a refinance or a line of credit instead.

Your obligations once it's in place

• Keep paying property taxes and home insurance, and keep the home in reasonable repair. Falling behind can put the loan in default.
• Live in the home as your principal residence. Moving out permanently, including into long-term care, normally makes the loan due.
• Repaying early, for example selling within the first few years, can trigger prepayment charges. Ask how they are calculated.
• You can usually make voluntary payments to slow the growth of the balance, within limits set by the lender.

Worked example: how interest builds

This is an illustrative example. The rate is an assumption chosen to show the arithmetic, not a quote, and interest is compounded annually for simplicity. Margaret is 70, owns a $700,000 home in Markham outright, and takes a $200,000 lump sum at 7%. She makes no payments.

If the home's value stayed flat, equity after 10 years would be about $306,600. If it rose 3% a year (also illustrative), the home would be worth about $940,700 and equity about $547,300. Home prices can fall as well as rise, which is exactly why the estate side of this decision deserves a real conversation with your family.

Setup typically includes an appraisal, an administration fee and independent legal advice, often in the range of $1,500 to $2,500 together, usually deducted from the advance.

Reverse mortgage vs HELOC vs downsizing

Home equity line of credit

A home equity line of credit usually carries a lower rate and lets you borrow only what you need. The revolving portion can go up to 65% of your home's value. The catch for retirees: you must qualify on income at the stress-test rate and make at least interest payments every month. Drawing $200,000 at an illustrative 6% means roughly $1,000 a month in interest alone. If your pension income covers that comfortably, a HELOC often costs less overall. If it doesn't, the reverse mortgage's no-payment structure starts to earn its higher rate.

Downsizing

Selling and buying something smaller turns equity into cash with no interest at all. It also brings real costs: real estate commission, legal fees, moving, and land transfer tax on the next purchase in provinces like Ontario and British Columbia. And it means leaving a home and neighbourhood you may love. For some people that's an easy trade; for others it's the reason they're reading this page.

A reverse mortgage

No monthly payments, no income test, and you stay put. In exchange, the rate is higher than a HELOC or regular mortgage, interest compounds, and less is left for your estate. It tends to suit homeowners with most of their wealth in the house, modest retirement income, and a clear wish to stay.

Loan proceeds are generally not taxable income and generally don't affect income-tested benefits such as OAS or GIS, but confirm your own situation with a tax professional.

Talking to your family and your lawyer

Every lender requires independent legal advice before funding. Your lawyer works for you, not the lender, and will walk through the interest, prepayment charges, what happens if you move into care, and what the estate can expect. We also encourage involving adult children or whoever will settle your estate early. Surprises after a death are the hardest part of a reverse mortgage; a frank conversation up front avoids most of them.

We arrange reverse mortgages across Canada, with local pages for reverse mortgages in Toronto, Vancouver homeowners 55+ and reverse mortgage options in Calgary.