The basic mechanics
If you are fifty-five or older, you can borrow against your home's value without making any regular payments. Interest accrues onto the balance, and the loan is repaid when you sell, move out, or pass away. You stay on title and in your home the whole time.
How much you can access
Typically up to fifty-five percent of the home's appraised value, depending on age, property type, and location. Older borrowers qualify for more, because the lender's expected timeline is shorter. Funds can come as a lump sum, scheduled advances, or a combination.
- No income qualification in the traditional sense
- Existing mortgages must be paid off from the proceeds
- The money is tax-free and does not affect OAS or GIS
The real cost
Reverse mortgage rates are higher than standard mortgage rates, and because no payments are made, the balance compounds. Over ten or fifteen years, equity can shrink substantially. That is the honest price of eliminating monthly payments, and it should be weighed against alternatives like downsizing or a HELOC.
Protections built in
Canadian reverse mortgages come with a no-negative-equity guarantee: you or your estate never owe more than the home's fair market value when it is sold, provided the property is maintained. Independent legal advice is required before closing, which exists to make sure nobody signs under pressure.
Who it suits best
Homeowners who want to age in place, whose wealth is mostly in the home, and whose priority is cash flow rather than estate size. If leaving the full value of the home to family is the top goal, a reverse mortgage works against that, and the family conversation should happen before the application, not after.
Frequently asked questions
- Can the lender force me out of my home?
- No. As long as you live in the home, pay property taxes, keep insurance current, and maintain the property, the loan cannot be called.
- What happens when I pass away?
- The estate repays the loan, usually by selling the home. Any remaining equity goes to your heirs, protected by the no-negative-equity guarantee.
- Can I still leave something to my kids?
- Usually yes. Most homes appreciate over time, and since you typically borrow only part of the value, equity often remains. The amount depends on how long the loan runs.