Short answer: a reverse mortgage lets homeowners 55 and older borrow against their home's equity without selling or making monthly payments. Interest accrues on the balance, and the loan (plus accumulated interest) is repaid when you sell, move out, or pass away. It's a real option for some retirees, but it isn't the cheapest way to access equity, and it isn't right for everyone.
Who Actually Qualifies
You (and your spouse, if applicable) need to be at least 55 years old, own your home outright or have significant equity in it, and the home needs to be your primary residence. There's no income or credit qualification in the traditional sense, since there are no monthly payments to make, which is why it appeals to retirees on a fixed income who might not qualify for a conventional refinance.
How Much You Can Actually Borrow
Generally, you can access somewhere between 15% and 55% of your home's appraised value, with the exact amount depending on your age (older borrowers can access more), the property's location and condition, and current interest rates. The two main providers in Canada are HomeEquity Bank (the CHIP Reverse Mortgage) and Equitable Bank, and both use similar age-based formulas.
What It Actually Costs
- Interest rates are higher than a conventional mortgage or HELOC, often by a meaningful margin, since there's no ongoing payment to offset the lender's risk.
- Interest compounds over the life of the loan since nothing is being paid down, which means the balance grows faster than a simple interest calculation over a long enough time horizon.
- Closing costs include an appraisal fee, legal fees, and often a setup fee charged by the lender.
- Independent legal advice is mandatory, at your own cost, so a lawyer with no connection to the deal confirms you understand what you're signing before it closes.
The Trade-Off, Honestly
A reverse mortgage lets you stay in your home and access cash without a monthly payment, which is genuinely valuable if your income is fixed and your equity is your biggest asset. The cost is that your equity shrinks over time instead of growing, and what's left for your estate is reduced by the accumulated balance. For some homeowners that trade is absolutely worth it. For others, a HELOC, a smaller conventional loan, or downsizing to a less expensive home accomplishes the same goal for less.
Alternatives Worth Comparing First
- Home equity line of credit (HELOC): lower rate, but requires income to qualify and typically expects at least interest-only payments.
- Conventional refinance or second mortgage: can still work if you have enough retirement income or investment income to qualify.
- Downsizing: selling and moving to a smaller or less expensive home converts equity to cash directly, without ongoing interest.
We walk through all three options side by side, with real numbers, before recommending a reverse mortgage, because it's rarely the automatic best answer, even though it's often the only one people have heard of.
Considering a Reverse Mortgage in Ottawa?
Get an honest comparison of what a reverse mortgage, a HELOC, and downsizing would each actually put in your pocket. Talk to Sean before signing anything.