How a reverse mortgage works
With a regular mortgage, you borrow money and pay it back each month. A reverse mortgage works the other way around. The lender pays you, and you don't have to pay anything back while you live in your home.
Each month, interest is added to what you owe, so the balance grows over time. When the home is eventually sold, the loan and interest are repaid from the sale, and you or your estate keep whatever is left.
You stay the owner of your home the whole time. Your name stays on the title, and no one can make you move as long as you keep to the loan terms.
Who qualifies
- Every homeowner on the title is 55 or older.
- The home is your main residence.
- You can keep paying property tax and home insurance, and keep the home in good repair.
You don't need a minimum income or a high credit score to qualify. Lenders mostly look at your age, your home's value, its type and its location.
How much you can get
You can borrow up to 55% of your home's appraised value. The exact amount depends mainly on the age of the youngest borrower: the older you are, the larger the share. A 60-year-old might qualify for around 15% to 30%, while someone over 80 can get much closer to the maximum.
Try our reverse mortgage calculator to estimate your amount.
How you receive the money
- A lump sum when the loan is set up, for example to pay off an existing mortgage.
- Regular advances, such as monthly deposits that top up your retirement income.
- A combination of a smaller lump sum now and advances later.
Taking money gradually means paying interest on less. Our lump sum vs monthly advances calculator shows the difference.
What it costs
Reverse mortgage rates are higher than regular mortgage rates, typically by one to two percentage points. There are also one-time costs to set it up, usually including a home appraisal, independent legal advice and a lender setup fee. Read what a reverse mortgage costs for details.
When the loan is repaid
The loan becomes due when the last borrower sells the home, moves out permanently, or passes away. You can also repay it early, though a prepayment charge may apply during a fixed term.
Canadian lenders generally guarantee that, as long as you meet the loan terms, you or your estate will never owe more than the home's fair market value when it's sold.
The money from a reverse mortgage is a loan, not income. It isn't taxable, and it doesn't affect Old Age Security (OAS) or the Guaranteed Income Supplement (GIS).
Is a reverse mortgage right for you?
A reverse mortgage tends to suit people who want to stay in their home, need extra monthly income or a lump sum, and don't want loan payments. It may not suit you if you plan to move within a few years, or if leaving the full value of your home to your family matters most. See the pros and cons and some alternatives before you decide.