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.

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.

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.

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%

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 theyâ€™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.

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

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.

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

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.

Written by:

Amy Orr

Amy Orr is a professional writer and editor with over 10 years of experience in the Canadian, U.S. and U.K. financial markets. She has written for numerous publications on topics as diverse as economic literacy, corporate finance, and technical analysis of numerical data. Prior to transitioning to full-time writing, she worked in the hedge fund sector. Her academic background is astrophysics, and she has a Masters in Finance from the University of Edinburgh Business School.

Reviewed by:

Jenna West

Jenna West is Smarter Loans' in-house financial writer and content director. She has been covering the Canadian FinTech and finance industry since 2017, including financial trends analysis, industry surveys, regulatory updates and changes in Canadian consumer behaviour when it comes to finance.