Reverse Mortgages in Canada - Compare Rates, Lenders & Options

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AMOUNT

$20K - $2M (Reverse Mortgage)

INTEREST RATE

4 - 5% (Ages 55+ only)

TERMS

Lifetime (Must be 55+ to qualify)

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What is a reverse mortgage?

A reverse mortgage in Canada is a loan available to homeowners aged 55+ that allows them to borrow up to 55% of their home's value without monthly payments. For example, a 70-year-old homeowner in Toronto with a home valued at $800,000 may qualify for $300,000 - $400,000 in tax-free cash, depending on the lender.

This unique type of loan is secured against the property, and provides access to immediate tax free cash, offering financial flexibility and security for the borrower without the stress of the regular repayments associated with a regular mortgage.

Can You Owe More Than Your Home Is Worth with a Reverse Mortgage in Canada?

A common concern about reverse mortgages is whether the interest could pile up so much that you'd end up owing more than your home is worth. Thankfully, Canadian reverse mortgages include a built-in safeguard called a "no negative equity guarantee." This means that, as long as you meet your obligations (like keeping up with property taxes, insurance, and maintenance), you or your heirs can never owe more than the fair market value of your home when the loan is repaid.

In fact, most Canadians who pay off their reverse mortgage still have plenty of equity remaining in their property often more than 50%. This feature protects your estate and provides peace of mind, knowing your home's value will always cover what's owing on the loan.

How does a reverse mortgage work in Canada?

As with a standard mortgage loan, a reverse mortgage is secured against real estate; but the similarities end there. Reverse mortgages do not require regular loan repayments; in fact, there are no reverse mortgage monthly payments of any kind. Instead, the loan's principal and interest accrue over time, so the loan grows in value rather than shrinking. This structure allows reverse mortgage borrowers to access tax-free cash without worrying about repayment, until the reverse mortgage is closed.

Why the U.S. Mortgage Market Poses Higher Risks

Unlike the Canadian landscape, the American mortgage market has created unique risks for reverse mortgage borrowers, mainly due to its structure and regulations. In the United States, banks and lenders routinely package and sell their mortgages as investment products on the open market. This practice introduces powerful profit-driven incentives into the system, prompting lenders to issue as many loans as possible including, at times, to borrowers who may not fully meet strict qualification standards.

This competitive environment increases the likelihood that reverse mortgages might be granted to individuals who struggle to manage them, heightening the risk of loan default. The ripple effects can be significant, as seen during financial crises when large numbers of risky loans led to widespread defaults and instability.

In contrast, Canada's reverse mortgage market is tightly regulated, with only a couple of national lenders such as Equitable Bank and HomeEquity Bank operating under strict oversight. These regulations prevent the sale of reverse mortgages as investments, prioritizing consumer safety over shareholder profits. As a result, Canadians benefit from more stringent approval processes, which helps protect homeowners from the pitfalls associated with an overly aggressive lending marketplace.

Eligibility & Requirements

To be eligible for a Reverse Mortgage, you must be:

Age 55+
Canadian resident homeowner
Sufficient home equity (usually 25-55%)
Eligible property type

What is the term length for a reverse mortgage?

Reverse mortgages are considered "life" loans, meaning they last the duration of the borrower's lifetime, or the length of time the reverse mortgage borrower owns the home. The loan terminates when the homeowner leaves the property, sells it, or passes away. At that point, the property's sale covers the entire loan balance, including all interest payments and any reverse mortgage fees.

What are the types of reverse mortgages you can get in Canada?

Canadian homeowners can choose from several types of reverse mortgages; these are basically the same in structure, but offer different ways to access the funds. Homeowners can opt for a lump sum payment of loan funds, or they can use the mortgage to establish a line of credit, which can be drawn from as needed.

What Consumer Safeguards Exist for Reverse Mortgages in Canada?

Reverse mortgages in Canada come with multiple safeguards to protect homeowners and distinguish them from some of the riskier lending practices found elsewhere, particularly in the United States.

Strict Eligibility and Responsible Lending
Canadian regulators have put robust checks in place no "Wild West" lending here. Only homeowners aged 55 and older may apply, and every legal owner of the property must meet this age requirement. This prevents scenarios like those seen south of the border, where only one spouse's age had to qualify, sometimes leading to unfortunate surprises when the older spouse passed away.

Transparency Around Fees and Interest
By law, Canadian lenders must provide clear, upfront disclosure of all costs, fees, and conditions. There are no surprise fees buried in the fine print what you see is truly what you get. And because Canadian reverse mortgage options are primarily offered by established banks like HomeEquity Bank and Equitable Bank, oversight is strong and ethical standards are high.

Strong Market Regulation and Consumer Protection
Canada's lending environment is notably stable and closely regulated. Lessons learned from past market disruptions (think the 2008 financial crisis) have resulted in conservative lending caps borrowers can access a maximum of 55% of their home's value. The Canadian system also prevents reverse mortgages from being bundled or sold off as speculative investments, unlike what occurred with American mortgage-backed securities.

Safeguards on Repayment and Eviction
A Canadian reverse mortgage typically does not require repayment (principal or interest) until the borrower sells the home, moves out, or passes away. The balance never exceeds the home's value and heirs are never left with debt. Your home remains yours as long as you live in it and fulfill obligations like paying property taxes and insurance.

In summary, Canada's reverse mortgage safeguards are designed with consumer protection in mind prioritizing financial stability, transparency, and honest lending, so homeowners can access their equity with peace of mind.

How Much Can You Borrow With a Reverse Mortgage?

The amount a homeowner can borrow through a reverse mortgage in Canada depends on their age, the fair market value of their home, and the amount of equity they have in it. Lenders use a percentage of the home's value to determine the maximum amount of the loan; this percentage is usually capped at 55%.

Age	Typical Max % of Home Value
55–64	~20–25%
65–74	~30–40%
75+	~50–55%

Home Equity Loan vs. Reverse Mortgage: Borrowing Power Compared

When it comes to how much you can borrow, home equity loans and reverse mortgages take two very different approaches.

With a home equity loan or Home Equity Line of Credit (HELOC) in Canada, homeowners may be eligible to borrow up to 80% of their home's appraised value, minus any outstanding mortgage balance. This higher limit can provide significantly more available cash, which can be particularly appealing if you're planning major home improvements, investing in a business venture, or covering larger expenses.

In contrast, reverse mortgages are capped at a maximum of 55% of your home's value. While this is plenty for many borrowers' needs, it's a more conservative limit, designed to ensure that older homeowners retain substantial equity as they continue living in their homes.

Ultimately, if maximizing your borrowing amount is a top priority and you're comfortable with regular payments, a home equity loan or HELOC offers greater lending capacity. However, if your main concern is accessing cash without taking on new monthly payments and you're 55 or older a reverse mortgage can be a better fit.

How Much Home Equity Do Most Borrowers Keep?

Most Canadian homeowners who use a reverse mortgage typically retain a significant portion of their home equity, even after the loan is eventually repaid. In fact, it's common for borrowers to have more than half of their home's value remaining once the reverse mortgage is paid off. Since reverse mortgage amounts are usually capped at 55% of your homeâ€™s value and interest is only charged on what you've received many borrowers find that a sizable equity cushion remains for them or their heirs. This means that a reverse mortgage can provide much-needed cash flow, while still preserving a substantial financial legacy tied up in the property.

Reverse Mortgage Calculator

Educational estimate only. Actual eligibility depends on lender criteria, property, location, and closing costs. Canadian reverse mortgages are typically capped at a maximum of 55% loan‑to‑value.

Common Use Cases for Reverse Mortgages in Canada

Reverse mortgages are designed to give older homeowners flexible access to the wealth they've built up in their homes. Here are some of the most common ways Canadians use reverse mortgage funds:

Use Case	How It Helps
Supplementing retirement income	Provides extra, tax-free funds to cover monthly expenses, travel, or lifestyle upgrades.
Paying off debt	Eliminates high-interest credit cards or existing mortgages without requiring monthly payments.
Funding renovations or medical expenses	Frees up cash for home upgrades, accessibility improvements, or ongoing healthcare costs.
Helping family with down payments	Allows homeowners to pass on wealth during their lifetime and support children entering the housing market.

Common Myths About Reverse Mortgages in Canada

Despite growing popularity, reverse mortgages are often surrounded by misunderstandings that can make retirees hesitant. Let's address a few of the most persistent myths circulating among Canadian homeowners:

Myth #1: "I'll Lose Ownership of My Home"

Many believe that if you get a reverse mortgage, the bank ends up owning your house. In reality, that's not the case. Just like with a regular mortgage or a Home Equity Line of Credit (HELOC), your name stays on the property title. You remain the owner, provided you stay current on property taxes, insurance, and basic home maintenance.

Myth #2: "I'll Owe More Than My Home Is Worth"

There's a concern that interest piling up could someday result in a debt greater than your home's value. Fortunately, Canadian reverse mortgages from reputable lenders like HomeEquity Bank and Equitable Bank include 'no negative equity guarantees'. That means you (or your estate) will never owe more than your home's fair market value at the time it's sold, as long as you meet your obligations as a homeowner.

Myth #3: "My Heirs Will Be Left With a Financial Mess"

Some worry that taking out a reverse mortgage will saddle family members with complicated debts or legal headaches. In practice, when the homeowner leaves the residence or passes away, the property is typically sold and the reverse mortgage gets paid out from the sale proceeds. Most often, there is still considerable equity remaining for your heirs, especially if the home's value has appreciated over time.

By understanding these facts, Canadian homeowners can make informed decisions about tapping into their home equity in retirement.

Does a Reverse Mortgage Affect Your Pension?

One of the biggest concerns for retirees is whether taking out a reverse mortgage will impact their pension income. The good news is that in Canada, reverse mortgage funds are considered tax-free loan proceeds, not income. This means they do not reduce or affect eligibility for government benefits such as:

Old Age Security (OAS)
Canada Pension Plan (CPP)
Guaranteed Income Supplement (GIS)

Because the money is tax-free, it won't push you into a higher income bracket or cause clawbacks on OAS or GIS. You can use the funds however you like - whether it's covering monthly expenses, supplementing retirement income, or paying off debts - without worrying about losing your benefits.

Note: while government pensions are unaffected, any income-tested private benefits or programs should be reviewed with a financial advisor to confirm their rules.

Pros and Cons of a Reverse Mortgage

Pros	Cons
No monthly mortgage payments required	Interest rates are higher than for traditional mortgages or HELOCs
Access to tax-free cash	Limited choice of providers in Canada
You keep ownership and title to your home	Upfront loan fees and closing costs apply
Stay in your own home while unlocking equity	Property taxes, insurance, and maintenance costs must still be paid
No minimum income requirement to qualify	Estate impact: the loan plus accumulated interest will reduce the inheritance left to beneficiaries
Does not affect government benefits (OAS, CPP, GIS)	Compound interest means the loan balance grows over time
Flexible use of funds — no restrictions on how money is spent

Fee Transparency: Canada vs. The US

When it comes to understanding the true cost of a reverse mortgage, Canadian homeowners enjoy a considerable advantage in transparency compared to their American counterparts. In Canada, federal regulations require lenders to clearly disclose all fees and charges associated with a reverse mortgage before you sign anything. This includes administrative fees, appraisal costs, legal expenses, and any ongoing account charges nothing is swept under the rug.

By contrast, in the United States, borrowers may encounter a more complex fee structure. Some lenders can charge a multitude of upfront and recurring fees, such as origination fees, servicing charges, and mortgage insurance premiums. Not all of these fees are always made clear at the outset, and there have been reports of borrowers in the U.S. uncovering additional costs after their reverse mortgage is already underway.

The key takeaway? In Canada, consumer protection laws make it much easier to know exactly what you're signing up for. That level of fee disclosure can mean fewer surprises down the road and more peace of mind for Canadian homeowners exploring their options.

What is a good reverse mortgage interest rate in Canada?

Reverse mortgage rates in Canada vary from lender to lender, and from applicant to applicant. They can depend on the applicant's age, details of the home being mortgaged, location, and type of reverse mortgage being applied for. In addition, the interest rate on a reverse mortgage in Canada can be fixed or variable, and for different lengths of time. Current rates for reverse mortgages range from 5.49% to 9.4%. To ensure you're accessing the lowest reverse mortgage rates possible, consider using a reverse mortgage broker to help you get the best deal.

Are Reverse Mortgage Fees Higher in the U.S. Than in Canada?

Reverse mortgage fees do tend to be steeper south of the border than they are here at home. In the United States, borrowers often face a combination of higher initial setup charges, closing costs, and ongoing service fees (sometimes tucked away in the fine print). These expenses can catch homeowners off guard if they're not reading the details carefully even major providers like FHA-insured HECM loans come with substantial insurance premiums and service charges.

In contrast, reverse mortgage lenders in Canada are required by law to disclose all fees upfront. Typical costs here may include an appraisal, independent legal advice, and administrative fees still significant, but generally lower and more transparent than what's often encountered in the U.S. As always, it pays to review your contract closely and ask questions so you know exactly what to expect.

How to Apply for a Reverse Mortgage in Canada

Applying for a reverse mortgage is a straightforward process. Here are the typical steps:

Pay off existing secured debts on your home
- Any HELOCs, mortgages, or other loans tied to your property must be cleared. (You can use your reverse mortgage funds to do this.)
Apply with a licensed reverse mortgage lender
- Choose from approved providers such as HomeEquity Bank, Equitable Bank, or Bloom Finance.
Choose how to receive your funds
- Options include a lump sum, regular monthly payments, or a combination of both.
Close the loan and access your money
- Once approved and finalized, the funds are deposited for you to use tax-free.

Documents Typically Required

Government-issued ID and personal information
Financial documentation (proof of debts, assets, or pensions if applicable)
Property details (home value appraisal, tax statements, insurance coverage)

Reverse Mortgage vs Refinancing vs HELOC

When considering how to access the equity in your home, Canadians often compare three main options: reverse mortgage, mortgage refinancing, and a home equity line of credit (HELOC). Each comes with its own pros, cons, and ideal borrower profile.

Option	Pros	Cons	Best For
Reverse Mortgage	• No monthly payments • Tax-free cash • Doesn’t affect OAS/CPP/GIS • Stay in your home	• Higher interest rates • Compound interest reduces estate value • Fewer providers available	Retirees 55+ who want cash flow without selling or making payments
Refinancing	• Lower interest rates than reverse mortgage • Access to lump-sum funds • Can reset mortgage term	• Requires regular monthly payments • Approval depends on income & credit • May involve prepayment penalties	Homeowners with steady income & good credit who want lower rates or larger lump sums
HELOC	• Flexible borrowing (use only what you need) • Interest only charged on amount used • Lower rates than reverse mortgage	• Requires income & good credit • Monthly payments required • Variable rates can rise over time	Homeowners with sufficient income & credit who want flexible, revolving credit

What Factors Should You Consider When Choosing Between a Reverse Mortgage and a Home Equity Loan?

When weighing the choice between a reverse mortgage and a home equity loan, it's important to look at several key factors to determine which option best fits your circumstances.

1. Loan Amounts and Access to Equity
Reverse mortgages in Canada typically allow you to access up to 55% of your home's value, depending on your age and property details. In contrast, home equity loans can provide up to 80% loan-to-value, potentially giving you access to more cash if you need a larger sum for renovations, investments, or unexpected expenses.

2. Eligibility and Qualification
Reverse mortgages are specifically designed for homeowners aged 55 and older. Qualification is primarily based on your age, property value, and location there are no minimum income or credit score requirements. On the other hand, home equity loans generally require good credit and sufficient income to qualify, as regular monthly payments are expected.

3. Repayment Structure
A key benefit of a reverse mortgage is that you aren't required to make monthly payments on the loan. Repayment typically occurs only when you sell your home or move out. Home equity loans, however, require you to make regular monthly payments for both principal and interest, which may not be ideal for those on a fixed income.

4. Interest Rates and Costs
Interest rates for home equity loans are usually lower than those for reverse mortgages. However, with a reverse mortgage, the interest compounds over time, potentially reducing the value of your estate. Be sure to compare the total costs, including any setup fees and ongoing considerations like property taxes, insurance, and maintenance.

5. Impact on Estate and Family
Since a reverse mortgage grows over time due to compounding interest and is typically repaid when your home is sold this can reduce the amount left to your beneficiaries. Home equity loans allow you to manage outstanding balances through regular payments, which may better preserve your estate for family members.

6. Flexibility and Use of Funds
Both options let you use the money however you wish, but your financial goals and cash flow requirements play a big part. If you need structured, predictable payments and can meet the qualification criteria, a home equity loan might suit you best. If you're looking for cash flow without the stress of monthly payments, a reverse mortgage could offer more peace of mind.

By considering these factors loan amount, eligibility, repayment terms, interest rates, estate impact, and flexibility you'll be better equipped to select the right tool for unlocking your home equity and supporting your financial goals in retirement.

Home Equity Loan vs Reverse Mortgage: Which Is Best for You?

Deciding between a home equity loan and a reverse mortgage depends on your unique goals, financial situation, and comfort with repayment terms. Each option has its own advantages and trade-offs, so it's important to consider what matters most to you.

Home Equity Loans
A home equity loan typically allows you to borrow up to 80% of your property's appraised value, less any outstanding mortgage balance. These loans often come with lower interest rates compared to reverse mortgages, which can make them attractive for those looking to minimize borrowing costs. However, lenders like TD, RBC, and Scotiabank usually require steady income and a good credit score to qualify, and monthly repayments begin right away.

Reverse Mortgages
Reverse mortgages (offered by providers such as HomeEquity Bank and Bloom Finance) enable homeowners aged 55+ to access up to 55% of their home's value without monthly repayments or credit score requirements. This can be especially appealing if you want to boost your cash flow without the pressure of early repayments or if your income is limited in retirement. Keep in mind, though, that interest rates are generally higher, and the loan balance grows over time.

Which Option Fits Your Needs?

Choose a home equity loan if you have reliable income, solid credit, and need to borrow a larger amount for specific expenses, and are comfortable with making regular payments.
Opt for a reverse mortgage if maintaining cash flow without monthly repayment is your priority, you're age 55 or older, and you prefer not to sell or refinance your home.

Ultimately, it's wise to compare offers from major Canadian banks and specialized lenders, consider your long-term financial plans, and speak with a mortgage advisor to find the option that aligns best with your needs.

Are Home Equity Loans Typically More Affordable Than Reverse Mortgages?

For many Canadian homeowners, a home equity loan can offer several financial advantages over a reverse mortgage especially when affordability is a priority. Home equity loans generally allow you to borrow up to 80% of your home's value, compared to the typical maximum of 55% with a reverse mortgage. This gives you greater access to funds should you need a larger sum for projects like renovations, investments, or other expenses.

Another key benefit is cost: home equity loans usually come with lower interest rates than reverse mortgages, making them a more budget-friendly way to tap into your home's value. However, keep in mind these loans require you to make regular payments and qualify based on income and credit, unlike a reverse mortgage where no payments are required until you move or sell.

Ultimately, if you have stable income and good credit, a home equity loan from major banks or lenders like TD Canada Trust or RBC can be a cost-effective solution, offering both greater borrowing power and lower interest costs than a reverse mortgage.

How to Get a Reverse Mortgage with Bad Credit

One of the unique advantages of reverse mortgages in Canada is that they are not based on your credit score or income level. Unlike traditional mortgages, personal loans, or HELOCs, reverse mortgage eligibility is determined primarily by:

Your age (55 or older)
The location and condition of your property
The amount of equity you have in your home

This makes reverse mortgages far more accessible for Canadians with poor or limited credit histories. As long as you meet the age requirement and your property qualifies, you may still be approved - even if you would be declined for a conventional mortgage.

In fact, some lenders allow older homeowners with bad credit to purchase a home using a reverse mortgage, an option not typically available through traditional mortgage products. This can provide a path to homeownership later in life, or allow retirees with damaged credit to downsize into a more suitable property.

Key takeaway: bad credit does not disqualify you from a reverse mortgage in Canada, but you should always review lender criteria and seek independent financial advice to ensure it's the right fit for your situation.

Expert Review & Editorial Standards

This page was researched, written, and reviewed by financial professionals with expertise in Canadian lending regulations. All information is regularly updated to reflect current rates, terms, and regulatory changes.

Reviewed By

Jenna West

Financial Writer & Content Director

Jenna has covered the Canadian FinTech and consumer lending industry since 2017. She specializes in regulatory updates, consumer protection, and helping Canadians navigate complex financial products.

8+ years analyzing Canadian consumer lending
Monitors FCAC and provincial regulatory changes
Specializes in personal loans and alternative lending

Written By

Amy Orr

Financial Content Specialist

Amy is a financial writer with 10+ years covering Canadian, U.S., and U.K. financial markets. She holds a Masters in Finance from the University of Edinburgh Business School and formerly worked in the hedge fund sector.

Masters in Finance, University of Edinburgh
Former hedge fund professional
Published in major financial publications

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