Reverse mortgage in Canada: what it costs and when it makes sense

A reverse mortgage is a loan secured against your home that requires no monthly payments. You keep title and you keep living there. Interest accrues onto the balance instead of being paid, and the whole amount comes due when the last borrower sells, moves out permanently, or passes away. In Canada the minimum age is 55, and every owner registered on title must meet it.

It is a legitimate product and for some households it is clearly the right one. It is also the most expensive way to access home equity, and the cost is invisible month to month because you never write a cheque. That combination is why it deserves a page that publishes the downside as plainly as the upside.

Below you will find current lender rates, the loan-to-value limits by lender and age, an honest compounding table showing what a balance does over 5, 10, 15 and 20 years, and a direct comparison against a HELOC, a refinance and downsizing. If one of those alternatives is cheaper for you, we will say so.

When people start looking at a reverse mortgage

These are the situations that bring homeowners over 55 to this page. Some of them point to a reverse mortgage. Several point somewhere else.

How does a reverse mortgage work in Canada?

A reverse mortgage lets a homeowner aged 55 or older borrow against their principal residence with no required monthly payments. You receive a lump sum, a series of advances, or a combination. Interest accrues and compounds onto the balance. Nothing is repayable until the last borrower sells the home, moves out permanently, or passes away, at which point the loan plus accrued interest is settled, usually from the sale proceeds.

You remain the registered owner throughout. You continue to pay property taxes, home insurance and maintenance, and you must keep the property in reasonable condition. The lender registers a first charge, which is why any existing mortgage or HELOC must be paid out and closed from the proceeds at closing. For many borrowers, clearing that existing mortgage is the entire purpose.

There is no stress test and no traditional income qualification. Income is reviewed only far enough to confirm you can carry property taxes and insurance. Credit is checked but carries much less weight than on a conventional mortgage, with no fixed score cutoff at most lenders. That is the product's genuine advantage: it approves households that every income-qualified product declines.

• Minimum age 55 for every person on title
• Must be your principal residence, generally occupied at least six months a year
• Minimum home value around $250,000 at the major lenders
• Detached, semi-detached, freehold and condo townhouses and standard condominiums are eligible; leasehold and co-ops generally are not
• Independent legal advice is required before the loan can be finalised, and lenders will refer you at no cost

Reverse mortgage rates in Canada and how much they cost you

Reverse mortgage rates sit well above ordinary mortgage rates because the lender receives no payments and carries the risk for an unknown number of years. The table below reflects lender rate sheets reported in spring 2026, alongside a CHIP 5-year special quoted around 6.39% in August 2026. Published figures vary between sources and change often, so treat these as indicative and ask for a live quote before deciding anything.

The comparison that matters is not one lender against another. It is a reverse mortgage against the alternatives. With prime at 4.45%, a HELOC at prime plus 0.50% costs 4.95%, and an uninsured 5-year fixed mortgage is 4.29%. A reverse mortgage at 6.54% is therefore roughly 1.6 percentage points more expensive than a HELOC and 2.25 points more than a regular mortgage. That is the real premium, and it is the number most reverse mortgage marketing does not print.

Reverse mortgage 5-year fixed rates and limits, Canadian lenders, spring 2026 (indicative)

The compounding problem: what a reverse mortgage does to your equity

This is the part that deserves the most attention. Because you make no payments, interest is added to the balance and then earns interest itself. The balance does not grow in a straight line. It curves, and the curve gets steep in the second decade.

The table below takes a $100,000 advance at 6.64% compounded semi-annually, and shows it beside a HELOC at 4.95% on which you pay the interest each month so the balance never grows. Both columns are the cost of borrowing the same $100,000. The difference is who pays the interest and when.

The honest reading of this table is that a reverse mortgage over five to ten years is expensive but manageable, and over twenty years it can consume a large share of the equity in the home. That is not a reason to avoid the product. It is a reason to borrow the amount you actually need rather than the maximum you are offered, and to revisit the decision every few years.

Cost of borrowing $100,000: reverse mortgage at 6.64% versus HELOC at 4.95%

Reverse mortgage vs HELOC vs refinance vs downsizing

There are four ways to turn home equity into money after 55, and a reverse mortgage is the most expensive of the four. It is also the only one that does not require you to qualify on income or to make a payment. That is the trade, stated plainly.

The decision usually comes down to two questions. Can you service a monthly payment on your current income, and do you intend to stay in the home for a long time? If you can service a payment, a HELOC or a refinance is cheaper. If you cannot, and you intend to stay, a reverse mortgage may genuinely be the only workable option. If you cannot service a payment and you are open to moving, downsizing usually beats all three on pure arithmetic.

Four ways to access home equity after 55

How much can you borrow, and what does the No Negative Equity Guarantee actually cover?

The maximum is generally up to 55% of the appraised value, and the actual percentage offered depends on your age, the ages of everyone on title, the property type and its location. Older borrowers are offered more because the expected term is shorter. A 55-year-old might see 15% to 25%; a borrower in their late seventies might see close to the maximum. Equitable Bank's Flex PLUS runs 45% to 59% for borrowers aged 70 and over, and Home Trust's EquityAccess reaches 59%.

The No Negative Equity Guarantee is the product's most reassuring feature and it is real: provided you meet your obligations and the home is sold at fair market value, you or your estate will not owe more than the home sells for, even if the balance has grown past the value. HomeEquity Bank publishes this on the CHIP product.

Read the carve-outs, because they are rarely mentioned. The guarantee excludes administrative expenses and interest that accrues after the due date, meaning after the loan has become repayable. If an estate takes eighteen months to settle a sale, that post-due-date interest is not covered by the guarantee. Ask your lawyer to walk your executor through this before you sign, not afterwards.

• Rural properties are accepted by some lenders at a reduced maximum loan-to-value
• Minimum initial advances at HomeEquity Bank are typically $20,000 to $25,000
• Advances are loan proceeds, not income, so they are not taxable and are not counted in the income test for OAS or GIS
• Interest is generally not tax-deductible unless the funds are used to earn investment or business income
• Closed terms carry prepayment charges if repaid early; open versions cost more, with CHIP Open at $2,995 or 1.25% of the loan, whichever is higher

What are the fees on a reverse mortgage?

Fees are usually deducted from the proceeds rather than paid up front, which makes them easy to overlook. They are not large relative to the interest, but they matter a great deal if you expect to repay the loan within a few years, because a fixed fee spread over three years is far more expensive per year than the same fee over fifteen.

Budget roughly $2,000 to $3,500 in total set-up costs at most lenders, and confirm the exact figures on your commitment letter.

Typical reverse mortgage set-up costs

What happens to a reverse mortgage when you die or move out?

The loan becomes repayable when the last borrower on title sells, moves out permanently, or passes away. In practice the estate or the surviving borrower has a defined window, commonly around six months, to repay the balance, usually by selling the home. Estates can also repay from other assets and keep the property.

Anything left after the balance is settled belongs to you or your estate. That is the point people most often misunderstand: a reverse mortgage does not transfer your home to the lender. It is a loan with a charge registered against title, exactly like any other mortgage. You are the owner throughout.

Moving into long-term care counts as moving out permanently, and this catches families off guard. If a move to care is a realistic possibility within a few years, factor in that the loan will come due at that point, along with the fixed fees you paid to set it up. Talk to your family before you sign, not after. An executor who first learns about a reverse mortgage during probate is an executor in a difficult position.

Who a reverse mortgage genuinely suits, and who it does not

It tends to suit a homeowner in their seventies or older, with substantial equity, an income that cannot service a payment, a strong preference for staying in the home for the long term, and a family who understands and supports the decision. Under those conditions the compounding runs for a manageable number of years and the alternative is often a forced sale.

It tends not to suit someone in their late fifties or early sixties who could still qualify for a HELOC, because thirty years of compounding at 6.5% can consume most of the equity in a home. It also tends not to suit anyone likely to move within about five years, because fixed set-up fees and possible prepayment charges are spread across too few years to be worth it.

There is no urgency here and you should be suspicious of anyone who creates some. A reverse mortgage is one of the few financial decisions that is very difficult to reverse. Take the file to your family, your accountant and the independent lawyer the lender refers you to, and take as long as you need.

• Take only what you need now, not the maximum you are approved for
• Ask for a written HELOC and refinance comparison before you commit
• Involve your executor or your adult children in the conversation
• Model the balance at 10, 15 and 20 years against a conservative home appreciation rate
• Review the arrangement every two to three years as rates and circumstances change

How Lendmax approaches a reverse mortgage file

We are a mortgage brokerage, not a reverse mortgage specialist, and that shapes how we handle these files. We have access to reverse mortgage lenders and to more than 30 conventional lender programs, so we can price both sides of the question rather than one.

In practice that means the first thing we do on a reverse mortgage enquiry is test whether you qualify for something cheaper. Only if the answer is no do we move to a reverse mortgage, and we will show you the arithmetic either way.

1. We test the cheaper options first — AI-assisted credit and ratio analysis tells us within a day whether you clear the stress test at contract rate plus 2% for a HELOC or a refinance. If you do, a HELOC at about 4.95% beats a reverse mortgage at 6.5% and we will tell you so in writing.
2. AVM valuation and a realistic loan-to-value estimate — An automated valuation model gives us an early read on your home's value so we can estimate the percentage you would actually be offered, based on your age and property type, before anyone orders a formal appraisal.
3. A written compounding projection you can take to your family — We model the balance at 5, 10, 15 and 20 years against conservative home appreciation, so you can see the projected equity remaining at each point rather than a single approval number.
4. Lender comparison and digital signing on your timeline — We compare available reverse mortgage lenders on rate, maximum loan-to-value for your age, fees and provincial availability. Documents are signed electronically, and we do not chase. Independent legal advice happens before anything is final.

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