What is a Reverse Mortgage?

How a Reverse Mortgage Works

A reverse mortgage allows homeowners to borrow against the equity they’ve built in their home, without selling it or making regular payments. Instead of paying the lender monthly, interest is added to the loan balance over time. The full amount — principal plus accumulated interest — is repaid when the home is eventually sold, the last borrower moves out permanently, or passes away.

This makes it different from a traditional mortgage, where you borrow a lump sum upfront and pay it down over the years. With a reverse mortgage, the debt grows instead of shrinking.

Who Qualifies for a Reverse Mortgage in Canada

Eligibility requirements are fairly consistent across Canadian lenders:

• You (and any co-owners) must be at least 55 years old
• The property must be your primary residence
• You must have sufficient equity in your home
• The home must meet the lender’s location and condition requirements

Unlike a conventional mortgage, income and credit score matter less — approval is based mainly on your age, home value, and location, since the loan is secured by home equity rather than your ability to make monthly payments.

How Much You Can Borrow

The amount available typically depends on your age, your home’s appraised value, and its location — generally, the older you are and the more valuable your home, the more you can access. Most Canadian lenders allow you to borrow up to roughly 55% of your home’s value, though the exact percentage varies by lender and individual circumstances.

Tip: Get a professional appraisal before applying. Since your borrowing limit is tied directly to your home’s value, an accurate, up-to-date appraisal can meaningfully affect how much you qualify for.

Reverse Mortgage vs. HELOC vs. Refinancing

Each option accesses home equity differently, and the right fit depends on whether you can comfortably manage monthly payments and how you plan to use the funds.

Pros and Cons of a Reverse Mortgage

Advantages:

• No monthly payments required
• Tax-free funds, with no impact on OAS or GIS eligibility
• Stay in and retain ownership of your home
• No negative equity guarantee protects your estate

Drawbacks:

• Interest rates are generally higher than conventional mortgages
• Loan balance grows over time, reducing home equity
• Fees can include appraisal, legal, and administration costs
• Reduces the inheritance available to your estate

Warning: A reverse mortgage isn’t the right fit for everyone. If you’re planning to move within a few years, or if preserving your full estate value for your heirs is a priority, it’s worth comparing this against other options first.

How to Apply

1. Speak with a licensed mortgage professional to review whether a reverse mortgage fits your situation
2. Get your home appraised
3. Complete independent legal advice, which is mandatory for all Canadian reverse mortgages
4. Review and sign your loan documents
5. Receive your funds as a lump sum, scheduled advances, or a combination of both.

    

   Definition: No Negative Equity Guarantee — a protection built into all federally regulated Canadian reverse mortgages, ensuring the amount owed will never exceed the fair market value of the home at the time it’s sold, provided the home has been reasonably maintained.