A reverse mortgage allows homeowners to borrow against the value of their home without having to sell or make regular payments. Instead, the loan gets paid back once the home is sold.
This specialized mortgage option is usually only available to those over the age of 55, and the maximum amount you can borrow is typically around 55% of the home’s value. You can choose to receive the loan as one lump sum or spread out as regular payments, usually monthly or quarterly.
Below, you'll find information on how reverse mortgages work, the costs involved, where you can get one, and more.
How does a reverse mortgage work in Canada?
A reverse mortgage works like a regular mortgage, with application and legal processes. The main difference from a traditional mortgage is that you don't have to make any repayments until you sell your home.
In order to get a reverse mortgage, you have to close any other outstanding credit that's secured by your home – like a mortgage or a home equity line of credit (HELOC). This can be done using the funds you get from the reverse mortgage.
You can decide to receive the funds either as a lump sum or through scheduled payments, with monthly and quarterly options being the most common. The money is tax-free, doesn't interfere with any government benefits, and can be used for anything you like.
Reverse mortgage recipients must continue to live in the home as their primary residence. They must also continue to pay property taxes, maintain proper insurance, and meet any other requirements set by the lender.
If you sell your house and its value has gone up, the appreciation is yours to keep. But if the value of your house goes down, you won't have to pay more than what your house is worth.
Eligibility requirements
To be eligible for a reverse mortgage, you must meet the following criteria:
- Own your home and live in it as your primary residence
- Live in the home for at least six months of each year
- Be at least 55 years old
- Have a home valued at $200,000+
Types of reverse mortgages
As with typical mortgages, there are a few different product types to choose from, including fixed rate, variable rate, open, and closed reverse mortgages.
- Fixed rate reverse mortgage: Maintains the same interest rate throughout the term
- Variable rate reverse mortgage: Has a fluctuating interest rate – it changes in accordance with the prime rate
- Open reverse mortgage: Allows you to fully repay the loan wherever you like, with no penalties or extra charges (although partial payments aren't allowed)
- Closed reverse mortgage: You have to stick to your payment schedule – any prepayments come with significant penalties
Keep in mind that reverse mortgages don't have traditional amortization periods, so your interest can accumulate indefinitely.
Who provides reverse mortgages in Canada?
To get a reverse mortgage in Canada, you currently only have three options: HomeEquity Bank, Equitable Bank, and Bloom.
Here's an overview of what these institutions offer:
| Financial institution | Availability | Product options | Interest rates | Fees |
|---|---|---|---|---|
| HomeEquity Bank | * All provinces (unavailable in the Territories) | * CHIP Reverse Mortgage * Income Advantage * CHIP Max * CHIP Open * HomeBridge | * Variable: 7.86% * 1 year: 8.19% * 3 years: 7.29% * 5 years: 6.69% | $1,795 |
| Equitable Bank | * Alberta * British Columbia * Ontario * Quebec | * Reverse Mortgage Flex * Reverse Mortgage Flex PLUS * Reverse Mortgage Flex Lite | (Flex rates)
* 6 months: 7.94% * 1 year: 8.09% * 2 years: 7.74% * 3 years: 7.19% * 5 years: 6.59% * 5 years adjustable: Prime + 2.65% | $995 |
| Bloom | * Alberta * British Columbia * Ontario | * Bloom Reverse Mortgage | * 1 year: 8.44% * 3 years: 7.59% * 5 years: 6.99% | $2,300 |
** The above information was last updated on March 6, 2025. Rates and costs change regularly, so consult the provider's website for current information.
Reverse mortgage fees and costs
Similar to typical mortgages, a reverse mortgage usually comes with some extra costs. These include:
- Home appraisal fee
- Legal fees (closing costs, etc.)
- Setup fee
- Administration fees
These fees can fluctuate depending on the location and value of the property and usually come to you as a one-time fee at the beginning of the mortgage.
Either way, these fees can usually be covered by the funds you receive from the reverse mortgage.
Reverse mortgage calculator
Let's look at an example of total cost, using this reverse mortgage calculator.
Say your single-family home is worth $400,000 and you were approved for a 50% loan ($200,000). Here are the different prices from HomeEquity Bank or Equitable Bank:
| Cost | HomeEquity Bank | Equitable Bank (Flex) |
|---|---|---|
| One-time fee | $1,795 (closing costs) | $995 (setup fee) |
| 5-year fixed rate | 7.29% | 6.59% |
| Loan amount | $200,000 | $200,000 |
| Total owed at end of term | $289,436.43 | $278,799 |
| Total interest accrued | $87,641 | $77,804 |
In this scenario, you'd save about $10,000 going with Equitable Bank.
The pros and cons of reverse mortgages
| Pros | Cons |
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FAQ
What is a reverse mortgage?
Reverse mortgages are available to homeowners age 55+ who want to access their home equity. You receive the loan as either a lump sum or monthly payments but repayments aren't necessary until you sell your home or pass away.
Are reverse mortgages a good idea in Canada?
Reverse mortgages can be a good option for homeowners in Canada who are 55 or older and need extra income while staying in their homes. However, they may not be ideal for everyone, as they can reduce the equity in your home and affect inheritance for heirs.
What are the benefits of a reverse mortgage?
The benefits of reverse mortgages include being able to spend the money however you like, not making repayments until you sell (or pass away), not having to pay taxes on the money received, and maintaining ownership of your home.
What is the downside to a reverse mortgage in Canada?
A few downsides of going with a reverse mortgage include having to pay initial setup fees or closing costs, possible prepayment penalties, and worrying about your beneficiaries having to pay back the loan after your death.
How much does a reverse mortgage cost?
There are a few fees associated with reverse mortgages, including closing costs, setup fees, and administration fees. These costs are on top of the interest owed on the total mortgage amount and any prepayment penalties incurreds.
Are reverse mortgages taxable income in Canada?
No, the funds you receive from your reverse mortgage don't count as taxable income. It also doesn't affect eligibility for government benefit programs like GIS and OAS. These are two big benefits of reverse mortgages.
Where can I get a reverse mortgage?
There are three options for reverse mortgage providers in Canada: Equitable Bank, HomeEquity Bank, or Bloom. HomeEquity Bank has the widest accessibility across the country, but Equitable Bank has the best interest rates and lowest processing fees.
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