Reverse mortgages are a financial option for homeowners, aged 55 or older, to tap into their home equity without selling their property. Unlike a traditional mortgage where you make payments to build equity, a reverse mortgage lets you borrow against that equity, receiving tax-free cash—either as a lump sum, regular payments, or a mix of both. You don’t have to repay the mortgage until you sell the home, move out permanently, or pass away, at which point the loan (plus interest) is settled, usually by selling the property.

How It Works

You can borrow up to 55% of your home’s current value, the exact amount depends on factors like your age (older borrowers get more), the home’s appraised value, location, and type of home (e.g., single-family vs. condo). The lender adds interest to the loan balance over time, so the amount you owe grows while your equity shrinks. Just like a traditional mortgage, you are still on title and still own the home, meaning you’re responsible for property taxes, insurance, and upkeep. If you have an existing mortgage or home equity line of credit (HELOC), you’ll need to pay it off first—often using the reverse mortgage funds.

Pros

• No monthly payments: Does NOT affect your OAS, CPP, GIC income etc. You have the option to make interest only payments and 10% of the principal annually.

• Stay in your home: You keep ownership and don’t have to move.

• Tax-free cash: Use it for anything—living expenses, debt, renovations, investments or even helping family buy a home.

• No negative equity guarantee: Lenders like HomeEquity and Equitable promise you’ll never owe more than your home’s value when sold, assuming you meet obligations.

• Reduce Probate Fees: The net equity in the estate is lowered if the home is passed through probate, thus potentially reducing the probate fee impact

Cons

• High interest rates: Compounds quickly, eating into equity.

• Fees: Appraisal ($300-$500), setup/legal costs ($2,000-$3,000), and prepayment penalties if you exit early (e.g., within 3-5 years).

• Reduced inheritance: Less equity left for heirs.

• Limited options: With only three providers, competition is thin, keeping rates high.

Eligibility

• Be 55+ (everyone on the title must qualify).

• Own a primary residence (lived in at least 6 months/year).
  

• Have sufficient equity (home value typically $200,000+).
  

• Some provinces require independent legal advice before signing.

TERMS & Rates

Reverse Mortgage terms start from 6 months to 5 years with fixed rates from 6.49%. These rates are higher than conventional mortgages because lenders can’t securitize them easily, face longevity risk (you might live longer than expected), and don’t get payments until the end.

Market Trends

Reverse mortgages are growing fast—over $8.2 billion in outstanding debt by mid-2024, up 18% from 2023 and 39% from 2022, per the Office of the Superintendent of Financial Institutions. Rising costs and a hot housing market (boosting equity) are driving demand, especially among seniors who are “house rich, cash poor.” The average borrower is 72, taking about $170,000, often to supplement income or pay debt.