Reverse Mortgages in Canada
For many Canadians who are approaching or in retirement, managing cash flow is a growing concern. Nearly half of Canadians say they’re worried about outliving their retirement savings, as rising housing, food, and healthcare costs continue to put pressure on fixed incomes. One option some homeowners consider is a reverse mortgage: a loan available to Canadians aged 55 and older that allows you to convert a portion of your home equity into tax-free cash, without selling your home or making monthly mortgage payments. Once seen as a last resort, reverse mortgages are now a viable alternative to downsizing or applying for a HELOC.
Let’s break down how reverse mortgages work in Canada, who qualifies, and what the pros and cons are.
Frequently asked questions
Who really benefits from a reverse mortgage?
What is the current interest rate for reverse mortgages in Canada?
Do you make monthly payments on a reverse mortgage?
What banks in Canada offer reverse mortgages?
Do you get a lump sum with a reverse mortgage?
How will a reverse mortgage affect my heirs and estate?
Guide to reverse mortgages in Canada in 2026
Jamie David, Sr. Director of Marketing and Mortgages
What is a reverse mortgage?
A reverse mortgage is a type of loan that allows Canadian homeowners aged 55 or older to access a portion of their home equity as tax-free cash, without selling the house or making monthly mortgage payments. Instead of paying the loan down over time, interest is added to the balance and repaid later, usually when the home is sold, or the borrower moves out permanently or passes away. Because a reverse mortgage reduces the equity you have in your home, it’s sometimes called an “equity release.” Even with your reduced equity, you retain full ownership and remain responsible for property taxes, insurance, and maintenance. The lender does not take title to your home.
Reverse mortgage eligibility
Unlike traditional mortgages, you don’t need to provide proof of income or a credit report for reverse mortgages, which can make them more accessible for retirees living on fixed incomes. To qualify for a reverse mortgage in Canada, you must:
- Be at least 55 years old (if you have a spouse on title, both must be 55 or older)
- Use the property as your primary residence for at least six months of the year
- Own a qualifying property, such as a detached home, condo, townhouse, semi-detached home, or duplex
- Have sufficient home equity
- Have a minimum appraised home value of around $250,000
- Own a property in an eligible location, usually major urban centers like Ontario, British Columbia, Alberta, or Quebec.
In general, the older you are and the more equity you have, the more you may be eligible to borrow — typically up to 55% of your home’s value through CHIP Reverse Mortgage and up to 59% through Equitable Bank. If you have an existing mortgage or home equity line of credit, you may still qualify, but it must be paid off when the reverse mortgage is set up, often using a portion of the proceeds.
How does a reverse mortgage work?
A reverse mortgage works in the opposite way of a traditional mortgage.
Step 1: You access your home equity
Step 2: No monthly payments are required
Step 3: The loan is repaid later
Because you retain ownership and occupancy of the home under a reverse mortgage, you’re responsible for several ongoing obligations, including:
- Maintaining the property
- Taking out an active fire insurance policy
- Paying property taxes
- Paying condo fees
- Living in the home as your primary residence (usually at least six months of the year)
- Not taking on additional secured debt, like a second mortgage or HELOC
How much can I borrow based on my home value and age?
Most Canadian reverse mortgages allow you to borrow up to 55% of your home’s value, though some lenders may allow higher limits — up to 59% in certain cases, depending on eligibility and circumstances. Because the loan is secured against your home equity, lenders look at how much equity you have when determining your borrowing limit. Home equity is calculated as:
Home equity = Value of home - Unpaid mortgage balance
For example, let’s say you have a home that’s worth $1 million, and you have $250,000 remaining on the mortgage. Your equity would be $750,000 ($1,000,000 - $250,000). Your lender will use this number, along with your age and home details, to determine your borrowing limit. Generally, the older you are and the more equity you have, the higher the percentage you may be able to borrow.
Keep in mind that while your mortgage balance will grow over time as interest accrues, rising home values may partially offset that increase.
Compare current mortgage rates across the Big 5 Banks and top Canadian lenders. Take 2 minutes to answer a few questions and discover the lowest rates available to you.
When is a reverse mortgage due?
A reverse mortgage becomes due — meaning the full loan balance must be repaid — under the following circumstances:
- When the home is sold,
- When the last borrower no longer resides in the property (for a period of at least six months),
- When the last borrower dies, or
- When you default on the reverse mortgage.
If the borrower passes away or moves into long-term care, the estate is responsible for repaying the loan, typically using the proceeds from the sale of the home. Any remaining equity after the reverse mortgage is repaid goes to the estate and can be distributed to heirs or beneficiaries.
Can you default on a reverse mortgage?
Yes, there are ways to default on a reverse home mortgage. Your lender can demand the funds back in case you:
- Misrepresent your financial situation on your reverse mortgage application
- Use the funds for illegal purposes
- Fail to keep your home in good condition, to the point that it impacts its value
- Don’t pay property taxes or home insurance
- Fail to follow any conditions laid out in your reverse mortgage contract
If you default, the lender can demand full repayment of the loan, which may lead to the forced sale of your home. That said, lenders generally work with borrowers to resolve the issue, especially if it’s due to missed taxes or insurance.
Can you buy a home with a reverse mortgage in Canada?
Yes, in some cases, a reverse mortgage can be used to help purchase a new primary residence, most commonly when downsizing or buying a home later in life. This typically involves making a large down payment, often around 45%–65% of the purchase price, using savings, investments, or proceeds from selling a previous home. A reverse mortgage is set up on the new home to cover the remaining amount, with the property acting as security. Depending on your age and the home’s characteristics, you can typically borrow between 10% and 59% of the home’s value.
As with other reverse mortgages, no regular payments are required. Interest is added to the loan balance and repaid when the home is sold or you move out permanently. It’s important to note that reverse mortgage interest rates are generally higher than those for conventional mortgages, which can increase the long-term cost of borrowing.
Reverse mortgage pros and cons
If you’re still wondering if reverse mortgages are a good idea, let’s look at the key considerations.
Advantages of reverse mortgages
- No required monthly payments: You’re not obligated to make regular payments unless you choose to do so.
- Tax-free cash: Funds received from a reverse mortgage are not considered taxable income and can be used for any purpose.
- Stay in your home: You can access equity without selling your property, allowing you to age in place.
- No negative equity guarantee: As long as loan terms are met, you or your estate will never owe more than the home’s fair market value.
- No impact on OAS or GIS: Reverse mortgage funds do not affect eligibility for government benefits like Old Age Security or the Guaranteed Income Supplement.
Disadvantages of reverse mortgages
- Higher interest rates: Rates are typically higher than those for traditional mortgages or HELOCs.
- Equity declines over time: As interest accumulates, the amount of equity left in your home decreases.
- Upfront and ongoing fees: Appraisal, legal, and administrative costs apply and may be deducted from the loan advance.
- Reduced inheritance: The loan must be repaid when you pass away or move out permanently, which can reduce what’s left for your heirs.
- Limited lender choice: In Canada, reverse mortgages are offered by a small number of lenders, which can limit rate competition.
Looking for a reverse mortgage?
Speak to a mortgage broker about the best option given your credit score, income and property.
Reverse mortgage vs. HELOC
Both reverse mortgages and home equity lines of credit (HELOCs) allow you to access the equity in your home, but they work quite differently.
| Feature | Reverse mortgage | HELOC |
| Repayment | No monthly payments required; the loan is repaid when the home is sold, or the borrower moves out or passes away | Monthly interest payments are required; principal repayment is flexible but must be repaid eventually |
| Eligibility | Must be 55+ and own a home with sufficient equity; no income or credit check required | Requires proof of income, good credit score, and overall financial stability |
| Maximum borrowing limit | Up to 55% of home value (based on age, home value, and equity) | Up to 65% of home value (based on equity and creditworthiness) |
| Access to funds | Lump sum, installments, or combination | Revolving credit — borrow and repay as needed |