Reverse Mortgages

If you’re over 55 years of age and own your home, then you have the potential to receive financial help via a reverse mortgage. Most of us have seen adverts for this new type of loan on TV and in flyers, and you may be wondering whether they’re safe to use, and how they work. To make sure you have all the information you need to make smart financial decisions, here we have a comprehensive reverse mortgage guide, with everything you need to know about how a reverse mortgage works.

Once you’ve satisfied your curiosity, you can choose one of the lenders below to be taken to their reverse mortgage application, or you can pre-apply online here and we will connect you with a mortgage provider in our network.

You can pre-apply for a reverse mortgage with Smarter Loans and we will connect you with a provider in our network.

Top Reverse Mortgages Providers in Canada

Interest Rate
$20,000 - $2,000,0000 (Reverse Mortgage)
4-5% (Ages 55+ only)
Lifetime (Must be 55+ to qualify)

What is a Reverse Mortgage Loan?

A reverse mortgage, also known as an “equity release” or a “home equity conversion mortgage” is a financial product designed for Canadian homeowners who wish to access the equity they have built up in their homes.

This unique type of loan is secured against the property and provides immediate tax free cash in hand, offering financial flexibility and security for the borrower.

How Reverse Mortgage Loans Work: No Monthly Mortgage Payments

Unlike a standard mortgage, reverse mortgages do not require monthly mortgage payments. Instead, the loan’s principal and interest accrue over time, with the loan growing in value rather than shrinking. This structure allows reverse mortgage borrowers to access tax-free cash without worrying about additional mortgage obligations.

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.

Accessing Reverse Mortgage Funds: Lump Sum, Line of Credit, or Monthly Payments

Canadian homeowners can choose from several options when accessing their reverse mortgage proceeds. They may opt for a lump sum payment, providing a large amount of cash to cover significant expenses or investments. Alternatively, they can establish a line of credit to draw from as needed, offering control over cash flow and financial planning. A line of credit is a great option if an expense is upcoming, but you’re not sure of its exact scale. Or, monthly payments can act as a supplemental income stream, easing the financial burden of living expenses and other costs.

Reverse Mortgage Lenders: CHIP and Equitable Bank

In Canada, the primary reverse mortgage lenders are HomeEquity Bank, which offers the Canadian Home Income Plan (CHIP) mortgage, and Equitable Bank, which provides a proprietary Equitable Bank Reverse Mortgage product. Both options allow homeowners to access the value of their home at competitive reverse mortgage rates. Almost all of the reverse mortgages issued in Canada come from one of these two lenders.

Reverse Mortgage Factors: Home Equity and Fair Market Value

The amount a homeowner can borrow through a reverse mortgage depends on their age and the fair market value of their home. Lenders use a percentage of the home’s value to determine the maximum amount of the loan, ensuring the loan is secured, based on the property’s worth.

Reverse Mortgage Considerations: Property Taxes and Early Repayment

While mortgage borrowers are not required to make monthly mortgage payments, they must continue to pay property taxes, maintain their home, and keep homeowners insurance. If a homeowner chooses to repay a reverse mortgage early, there may be penalties involved.

Importance of Independent Legal Advice

It’s essential for homeowners to seek independent legal advice when considering this type of mortgage. Working with reputable mortgage lenders and advisors ensures a thorough understanding of the mortgage process and its implications, allowing borrowers to make informed decisions about their financial future. Getting a reverse mortgage is a big decision, and there are reverse mortgage scams that sully the reputation of the reverse mortgage industry via suspicious interest costs, obscene closing costs, and so on. The key to successfully avoiding reverse mortgage scams is to obtain the help of a reputable mortgage broker.

Why Do People Use Reverse Mortgages?

Home equity loans – of all types – are very useful tools if you have built equity in your home but lack regular income or need a one-off injection of cash. The funds released via a home equity loan are tax free, so there are literally no payments to worry about until the home is vacated.

Reverse Mortgage Debt in Canada has increased over time

Common Uses for Mortgage Funds

There are no restrictions on how the loan proceeds from these mortgages can be used, offering flexibility for borrowers. Some common purposes for mortgage funds include:

Utility Bills and Regular Expenses:

A reverse mortgage can help cover monthly expenses, such as utility bills, providing financial relief for homeowners with limited income sources.

Travel Expenses:

The tax-free funds can be used to finance vacations and travel, allowing homeowners to enjoy their retirement years without financial stress.

Home Renovations:

Mortgage proceeds can be invested back into the property for necessary home renovations or improvements, increasing the home’s value and comfort.

New Purchases:

The money from a reverse mortgage can also be used for purchasing items like a new car, furniture, or other desired goods, enhancing the borrower’s lifestyle.

There are however certain renovations that can offer more value than others. Learn Which Renovations Increase the Value of Your Home & Why It’s Wise To Do Them.

Paying Off Other Debt

By turning home equity into tax free cash, you may be able to pay off other outstanding debt, and thereby relieve financial pressure.

Medical and Care Bills:

Mortgages can cover medical and care expenses, ensuring adequate healthcare and support for homeowners as they age.

Bridge Financing Until Pension Kicks In:

A mortgage can also serve as bridge financing for retirees awaiting pension benefits, such as the Guaranteed Income Supplement, offering financial stability during the interim period.

Working with Mortgage Brokers and Exploring Options

Canadian homeowners interested in this type of mortgage should consult with mortgage brokers to explore available options, such as the Equitable Bank offers. These professionals can provide guidance on mortgage contracts, adjustable rates, and other relevant factors. They can also provide guidance on eligibility requirements and the best way to access the money from a reverse mortgage given your situation – e.g. via an initial advance, regular monthly payments, and so on.

By obtaining a free estimate, homeowners can better understand the entire loan process and determine if this type of mortgage is the right solution for their financial needs.

Who Can Get a Reverse Mortgage?

Eligibility for a home equity mortgage is straightforward, but certain factors must be considered before approval. If you’re interested in this financial product, it’s essential to understand the basic requirements and how they influence the loan’s terms.

Basic Eligibility Requirements

To be eligible for a reverse mortgage, you must:

  • Be aged 55 or over (if another person is listed on the home’s title, they must also meet this age requirement)
  • Own your own home in Canada and have it serve as your primary residence

Factors Affecting Approval and Borrowing Amount

If you meet these basic requirements, lenders offering these mortgages will consider additional factors to determine whether or not to approve your application. These factors influence the likelihood of approval and the amount you’ll be able to borrow, and include:

  • Your age
  • Your home’s location
  • Your home’s condition
  • The type of property (e.g., condo, detached home, etc.)
  • The home’s appraised value
  • The amount of equity you have in the property

Understanding Reverse Mortgage Terms and Charges

A reverse mortgage is a loan that lets you access your home’s equity without making monthly payments. The loan advance is typically provided at a fixed interest rate, although some lenders may offer adjustable rates.

It’s crucial to understand the terms of your reverse mortgage, including any prepayment charges if you decide to repay the reverse mortgage early.

Additionally, be aware that if the borrower dies or sells the home, the entire loan balance must be repaid, usually through the proceeds of the home’s sale.

Working with Lenders Who Offer Reverse Mortgages

When exploring reverse mortgage options, work with lenders who specialize in these products, such as HomeEquity Bank and Equitable Bank. They can provide guidance on reverse mortgage interest rates, down payment requirements, and other essential factors.

By understanding the eligibility criteria and working with reputable lenders, you can make an informed decision about whether a reverse mortgage is the right solution for your retirement savings and financial needs.

Where Can I Get a Reverse Mortgage?

At the moment, there are several reputable reverse mortgage providers in Canada, including Bloom Finance Company, Equitable Bank, and HomeEquity Bank (provider of the CHIP reverse mortgage). These providers offer mortgages that allow Canadians aged 55+ to access the wealth they’ve built in their homes.

The reverse mortgage works by securing a loan against the value of your home, which can be received as a lump sum or as monthly payments. Interest accrues on the amount of the loan as it is received, and the loan is tax-free cash. When applying for a reverse mortgage, you will need to provide personal information, financial documentation, and documentation pertaining to your home. Equitable Bank requires the home in question to be worth more than $250,000, while Home Equity Bank requires the home to be valued at more than $150,000.

It’s important to note that while these mortgages can provide financial flexibility, they come with higher adjustable interest rates than traditional mortgages and other types of loans. And you must be aware that unlike other loans, they come with a rising loan balance, as all repayment is deferred until you sell your home or pass away. Additionally, you must pay off any existing mortgage or other outstanding debts on the home before securing a reverse mortgage. This includes any open home equity line.

At the moment, there are several reputable reverse mortgage providers in Canada:

1. Bloom Finance Company

  • Modern finance company on a mission to make it as simple as possible for Canadians 55+ to access the wealth they’ve built.
  • Available in Ontario, with plans to expand to other provinces.
  • Founded in 2019

2. Equitable Bank

  • One of Canada’s ten largest banks
  • Mortgages only available in select major urban areas
  • Require the home in question to be worth more than $250,000
  • Minimum borrowing amount of $25,000

3. HomeEquity Bank (CHIP) 

  • Available throughout Canada
  • Most widely used reverse mortgage provider
  • Private corporation active since 1986
  • Requires that home in question is valued at more than $150,000

This lack of providers does mean that there is less competition in this space than in other areas of financing, and so interest rates are higher than with traditional mortgages and some other types of loan.

How Can I Get a Reverse Mortgage Loan?

Getting a reverse mortgage is an easy process with just a few simple steps:

Step One

Pay off any other outstanding debts on the home (such as HELOCs or other mortgages). You may use the reverse mortgage to help you cover these debts – the key is that, when in place, it is the only loan secured against the property.

Step Two

Apply for a reverse mortgage with your chosen lender, such as Equitable Bank or HomeEquity Bank (CHIP) who offer reverse mortgage loans throughout Canada. They will want to see personal information, financial documentation, and documentation pertaining to your home. The reverse mortgage interest rate is higher than traditional mortgages, but the loan is tax-free cash that you can use as you wish.

Step Three

Decide how you want your funds. You can opt for either a single lump sum payment or a small amount upfront, followed by monthly mortgage payments. The lump sum amount will depend on the value of your home and the reverse mortgage rates offered by the lender. Interest accrues on the loan amount as it is received, so opting for monthly mortgage payments means less interest over the life of the loan. It’s important to note that you must pay property taxes and keep the home in good condition during the loan period.

You do sometimes have the option, if you so choose, of repaying the loan in partial payments over time. If you do not do this, and choose to wait until the mortgage closes, you should know that the amount owing at the end of the loan’s life will be greater than the amount initially borrowed. This is because the final reverse mortgage balance includes all of your interest payments. This is one of the major draws of a CHIP reverse mortgage or other reverse mortgage – the ability to access the equity in your home and continue to live in it without having to make mortgage payments.

What’s the Effect of Changing Property Prices?

All of the above probably has you wondering what happens as the value of your home fluctuates with the property market. If you have an Equitable Bank reverse mortgage the amount of the loan is calculated based on the value of your home, so any change in home value will affect the amount of money you can borrow. However, the reverse mortgage lets you stay in your principal residence, and you can continue to live there without making mortgage payments.

There are calculators available to give you a more specific picture, but essentially you only need to be aware of two scenarios:

1. Your Property Value Increases

If this happens, your reverse mortgage is not affected. The only effect of an increase in home value is a change in the amount of equity you have in the home. As the home value increases, the proportion of the property mortgaged becomes smaller, and so your share of equity increases.

However, over time, the amount of interest accrued on the mortgage also increases, making the loan larger. So the crucial number to consider is the difference between the rate of your home’s appreciation and the interest rate on your mortgage. It’s worth noting that some lenders, like HomeEquity Bank, offer the lowest reverse mortgage rates and interest only payments.

2. Your Property Value Decreases

If property prices take a tumble (or if property prices are stagnant and your mortgage’s interest accrues past the value of your home), you may be concerned about repaying your loan. A reverse mortgage requires that your home value is more than a certain threshold, such as $150,000 for HomeEquity Bank. However, these mortgages usually come with a negative equity guarantee: if, when the mortgage is closed, you owe more back than the home is worth, you (or your beneficiaries) are protected from this shortfall. You will never have to repay more than the fair market value of your home.

Additionally, some lenders allow prepayment changes, which means you can pay more money towards your reverse mortgage to reduce the amount of interest that will accrue over time. If you have enough savings, you can also make a down payment to reduce the amount of the loan.

Reverse Mortgage Rules and Requirements

Once you have a reverse mortgage on your home from lenders such as HomeEquity Bank (CHIP) or Equitable Bank, it’s important to understand the stipulations of the reverse mortgage contract. The reverse mortgage lets you convert your home equity into tax free cash, but there are rules you must follow to stay in line with the loan’s requirements. These are:

  • Pay all applicable property taxes. The reverse mortgage lender will want to ensure that the home is free of any property tax liens.
  • Live in the house as your primary residence.
  • Maintain insurance on the home. Keep the home in a good state of repair. The reverse mortgage lender wants to ensure that their collateral (the home) is in good condition and that the value of the home is maintained.
  • Avoid using the funds from the reverse mortgage for illegal activities. The reverse mortgage contract specifies the intended use of the loan, and you must adhere to these guidelines.
  • If you fail to meet any of these conditions, you will default on the loan. The reverse mortgage lender may then take steps to recover their investment, including selling the property at the appraised value.

To get more information on reverse mortgage rules in Canada, please visit the government of Canada resource. Additionally, it’s worth noting that mortgage rates can change over time, and you should stay informed about any changes in interest rates that may affect your reverse mortgage.

Closing a Reverse Mortgage

When you have a reverse mortgage from lenders such as HomeEquity Bank (CHIP) or Equitable Bank, it’s important to understand how reverse mortgages work and how the loan is repaid. The amount of the loan is calculated based on the appraised value of your home, and you can choose to receive the loan as a lump sum or as monthly payments. Reverse mortgages let you access your home equity, giving you more money to spend on your retirement or other expenses.

There are a couple of ways to close a reverse mortgage:

  • When the homeowner(s) die, the reverse mortgage specialist will work with the estate to repay the loan. The estate may choose to sell the home to repay the loan.
  • When the homeowner(s) sell the home, the loan must be repaid in full. Any remaining equity can be used as desired.
  • When the homeowner(s) choose to repay the loan, but remain in the home, they will need to repay the amount of the loan plus any interest and prepayment charge.
  • When the homeowner(s) vacate the property (e.g. to go into long term care), the loan must be repaid in full.

The amount of time you, or your estate, have to repay the loan varies by lender and circumstance. It’s worth noting that some lenders, such as HomeEquity Bank, offers reverse mortgages with no prepayment charges, allowing you to pay off the loan earlier without incurring additional fees. A reverse mortgage specialist can help you understand the terms of your loan and work with you to determine the best repayment strategy for your needs.

Reverse Mortgage Fees

As with any mortgage, most reverse mortgages come with some fees. These should be included in your financial calculations, and if necessary added to the loan amount. It’s recommended that you budget around $2,500 to cover these costs. Typical fees include:

  • Legal fees
  • Appraisal fees
  • Administrative fees
  • Early prepayment fees

Pros and Cons of Reverse Mortgages

If you’re a Canadian homeowner aged 55 or older and considering a reverse mortgage, it’s important to carefully review the pros and cons of a reverse mortgage so you can make an informed decision.


  • No monthly payments
  • Tax free cash
  • No transfer of home ownership
  • Stay in your own home
  • No income requirements
  • Does not affect benefits (like OAS)
  • Usually come with a negative equity guarantee


  • Interest rates are higher than for other loan types
  • Interest accrues quickly
  • Limited choice of providers
  • Some fees apply, increasing the cost of the loan
  • Impacts your estate’s beneficiaries if the loan is repaid after your death

Frequently Asked Questions About Reverse Mortgages

How much does a reverse mortgage cost?

This depends on the loan you take out, the interest rate, and the lender’s fees. It also depends on how long you have the loan for. The longer the loan lasts, the more interest it accrues, hence costing you more. HomeEquity Bank and CHIP reverse mortgage offer reverse mortgages, which are secured loans against the appraised value of your home, allowing you to turn your home equity into tax free cash.

What kind of home can I get a reverse mortgage on?

Reverse mortgages can be taken out on any privately owned home, as long as it meets the lender’s criteria (usually a minimum value of $150,000), and as long as it is the borrower’s primary residence. If the property has multiple owners, then all of the owners must meet the lender’s requirements.

How much can I borrow with a reverse mortgage?

The amount you can borrow depends on the value of your home. With a CHIP reverse mortgage or HomeEquity Bank reverse mortgage, the upper limit is 55% of the home’s value.

Who owns my home when I take out a reverse mortgage?

You still own your home when you take out a reverse mortgage; just as with a traditional mortgage, the loan does not impact your ownership. The loan is simply secured against the property.

Will a reverse mortgage affect my benefits?

No, they do not affect benefits, as income from a reverse mortgage is tax free. It’s worth noting that a reverse mortgage is a loan, and as such, it is not considered income.

If my spouse dies, what happens to our reverse mortgage?

If you own your home with your spouse, the reverse mortgage is maintained after they pass away. For the mortgage to close, both spouses need to pass away or vacate the home.

How will a reverse mortgage affect my children’s inheritance?

This depends on how the mortgage is closed. If you close it or repay it prior to your death, for example if you sell your home, then it will have no more effect than repaying any type of loan. If the reverse mortgage is automatically closed after you pass away, then your estate repays the loan. This naturally reduces the sum of money left to your beneficiaries, but rest assured: if property prices fall, they will not be stuck paying the cost of your loan out of pocket. With HomeEquity Bank reverse mortgage or CHIP reverse mortgage, your home equity can be a valuable resource for your retirement planning.

How does a reverse mortgage work?

A reverse mortgage allows you to access the equity in your home, giving you more financial flexibility during your retirement years. With a CHIP reverse mortgage or Equitable Bank reverse mortgage, you can borrow money against the appraised value of your home. The amount of the loan is based on your age, the appraised value of your home, and the lender’s fees. The loan does not have to be repaid until you sell your home, move out, or pass away. At that time, the loan, plus interest and any fees, must be repaid. If you have a CHIP reverse mortgage or HomeEquity reverse mortgage, you or your heirs can choose to repay the loan at any time without penalty.

Reverse mortgage funds allow you to convert your home equity into cash, which can be used to pay for medical expenses, home renovations, travel, or any other expenses you may have during retirement. With a CHIP reverse mortgage or Equitable Bank reverse mortgage, you can access up to 55% of your home’s value. You still own your home, and the loan is simply secured against the property. If you’re looking for other financing options for travel, medical expenses, or home renovations, personal loans or a line of credit offers a flexible and accessible option to help you fund your needs with manageable repayment terms.

Overall, a reverse mortgage can be a valuable tool for seniors who want to access their home equity without selling their home. HomeEquity and CHIP reverse mortgage offer reverse mortgages, which can be a helpful way to access your home equity and supplement your retirement income.

Types of Reverse Mortgages offered:

  • Reverse Mortgages

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