What Is a Canadian Reverse Mortgage?

A reverse mortgage lets an older homeowner turn some of their home's equity into cash without selling and without monthly payments. It can be a genuinely useful tool — and it comes with real trade-offs. Here's a straight explanation of both.

For a lot of retired Canadians, most of their wealth is sitting in a paid-off or nearly paid-off house. A reverse mortgage is one way to access some of that equity without moving out. In Canada, these are available to homeowners 55 and older, and the defining feature is simple: you don't make regular payments. The loan and its interest are repaid later — when you sell, move out, or pass away.

Before I go further, the honest disclaimer: I'm a realtor, not a mortgage broker or financial advisor. This is a plain-language overview, not financial advice. A reverse mortgage is a significant decision, and I'll point you to the right people at the end.

How It Works

With a normal mortgage, you borrow money and pay it down over time. A reverse mortgage runs the other way. You borrow against the equity you've built, and instead of you paying the lender each month, the interest is added to the loan balance. The balance grows over time; your equity shrinks by the same amount.

You can usually take the money as a lump sum, in instalments, or a mix — and use it for whatever you like: topping up retirement income, home repairs, medical costs, or helping family. As long as you keep living in the home and meet the terms (keeping it insured, in good repair, and taxes paid), you're not required to make payments.

Who Offers Them in Canada

Reverse mortgages in Canada are a specialized product offered by a small number of institutions. The best-known is the CHIP Reverse Mortgage from HomeEquity Bank, and Equitable Bank also offers one. These are regulated Canadian financial institutions, and how much you can borrow depends on your age, your home, its location, and its value — generally up to around 55% of the home's value, with older borrowers qualifying for more.

(You may see American articles reference "HECM" programs — that's a U.S. structure and doesn't apply here. In Canada, the products above are what you're actually choosing between.)

The Trade-Offs to Weigh

This is where you need clear eyes. A reverse mortgage can solve a real problem, but the costs are real too.

• Interest rates are typically higher than a conventional mortgage, and because interest compounds on a growing balance with no payments, the amount owed can climb significantly over the years.
• Your equity shrinks. The longer the loan runs, the less of your home's value remains — which affects what's left for you later or for your heirs.
• It affects your estate. The loan is repaid from the home when you die or sell, reducing the inheritance you leave behind. That's a conversation worth having with family.
• It may interact with benefits. Depending on your situation, it's worth understanding any effect on government income-tested programs.

None of this makes a reverse mortgage a bad idea — for the right person, in the right situation, it can be exactly right. But it's not a decision to rush.

Consider the Alternatives Too

Before committing, it's worth honestly comparing the other ways to access that equity: downsizing to a smaller home or condo and freeing up cash directly, a conventional home equity line of credit if you can service payments, or simply selling. Sometimes one of these fits better; sometimes the reverse mortgage genuinely wins. The point is to compare.

Who to Talk To

Three professionals matter here. A mortgage broker or the lender can give you real numbers for your situation. A financial advisor can look at how it fits your whole retirement picture. And a lawyer should review the agreement and explain the estate implications before you sign — in fact, independent legal advice is typically required for these products.

If part of your thinking involves whether to stay put or downsize, that's squarely my department — I'm glad to talk through what your home might sell for and what your options look like in today's market, with no pressure either way.

Just call John — 780-937-7534.