Joe Dumond, Broker
Sutton Group-Masters Realty Inc

Reverse Mortgages

What is a reverse mortgage?

A reverse mortgage is a type of loan for homeowners, usually aged 55 or older. It allows you to borrow money from your home equity without selling your home. You may do so by converting a portion of your home equity into tax-free money. Financial institutions sometimes call this “equity release.”

You may usually borrow up to 55% of the current value of your home. This money doesn’t affect the Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting.

The maximum amount you may borrow depends on:
- your age and the age of other individuals registered on the title of your home
- your home’s condition, type and appraised value
- your lender

To be eligible, the home you’re using to secure a reverse mortgage must usually be your primary residence. This typically means you live in the home for at least 6 months a year.


Costs of a reverse mortgage

The interest rate for a reverse mortgage is usually higher than the interest rate for a:
- mortgage
- home equity line of credit (HELOC)

Your lender adds your interest costs to your reverse mortgage. This means that the total amount you owe increases over time.

Other costs associated with a reverse mortgage may include:
- home appraisal fees
- set-up fees
- prepayment penalties if you pay off your reverse mortgage before it’s due
- legal fees
- closing costs

These costs may vary depending on your lender.

Your lender may add the fees to the balance of your reverse mortgage. You may have to pay for other fees up front. Ask your lender about the fees that apply to your reverse mortgage.

How you get your money from a reverse mortgage also impacts your costs.

You may get your money from a reverse mortgage as:
- a lump-sum for the entire amount
- a lump-sum for part of the reverse mortgage and the rest over time
- regular payments

Ask your lender how you may get your money from a reverse mortgage.


What to consider before getting a reverse mortgage

Make sure you understand the costs and the impact a reverse mortgage may have on you and your estate. Shop around and explore different options.

Before you get a reverse mortgage, compare other options such as:

  • selling your home and:
    - buying a smaller home
    - renting another home or an apartment
    - moving into assisted living, or other type of housing
  • getting another type of loan, such as:
    - a line of credit, like a home equity line of credit (HELOC)
    - a mortgage
    - a personal loan

Your financial institution may offer other products that may be better suited for your financial needs.


Pros and cons

Before you decide to get a reverse mortgage, make sure you consider the pros and cons carefully.

Pros

  • you don't need to make any regular payments
  • you may turn some of the value of your home into cash, without having to sell it
  • you still own your home
  • you may have options as to when and how you receive the money
  • you don’t pay tax on the money you borrow
  • this money doesn’t affect the Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting


Cons

  • interest rates are higher than most other types of financial products like:
    - a mortgage
    - a HELOC
  • the equity you hold in your home may go down as you accumulate interest
  • your estate may need to repay the reverse mortgage and interest within a set period of time when you die
  • the time needed to settle an estate may be longer than the time allowed to repay a reverse mortgage
  • there may be less money in your estate to leave to your children or other beneficiaries


Source: Government of Canada web site last updated Oct 15, 2025.