- You can usually borrow up to 55% of your home’s current value, depending on your age, the home and the lender.
- No regular payments are required. The loan and interest are repaid when you sell, move out or the last borrower dies.
- The money is tax-free and doesn’t affect Old Age Security or Guaranteed Income Supplement benefits.
- Rates are usually higher than on a mortgage or HELOC, and interest is added to what you owe, so the balance grows.
Checked October 2026
How a reverse mortgage works
A reverse mortgage is a loan secured by your home. Instead of you paying the lender every month, the lender pays you, either up front or over time, and the interest is added to the loan. You keep ownership of the home and live in it as usual.
FCAC says you must usually be 55 or older and the home must usually be your primary residence, which typically means living there at least 6 months a year. The maximum depends on:
- Your age, and the age of anyone else on the title
- Your home’s condition, type and appraised value
- The lender’s own rules
You may usually borrow up to 55% of the current value of your home. Any existing mortgage or HELOC usually has to be paid off first, and the lender may let you use the reverse mortgage money to do it. While it’s in place, you may not be able to take out a HELOC or similar borrowing on the same home.
How the money is paid out
How you take the money changes what it costs. FCAC describes three common set-ups:
One lump sum
You get the whole amount at once and pay interest on all of it from day one, which is expensive if you don’t need it right away.
Part now, the rest later
Lenders that allow this may require a minimum up front, typically around $25,000. Each later draw may bring a fee or a new rate on the entire balance.
Regular payments
Money arrives on a schedule, typically $1,000 a month or $3,000 every 3 months, often after an initial amount of around $20,000.
You can spend it on anything: home repairs, regular bills, health care or paying off debts. Ask your lender about any restrictions or fees.
What a reverse mortgage costs
The interest rate is usually higher than on a regular mortgage or a home equity line of credit. Because nothing is paid while you live there, interest is added to the loan and then charges interest itself, so the amount you owe rises every year and the equity left in your home shrinks. To see how quickly a balance compounds, try our compound interest calculator with a rate from the lender.
On top of interest, FCAC lists other costs that vary by lender:
- A home appraisal
- Set-up fees, legal fees and closing costs
- Prepayment penalties if you repay before the loan is due
Some fees can be added to the loan, while others are due up front.
When it has to be repaid
You don’t make regular payments, though most lenders let you pay down some of the balance, and you can usually repay it all early, possibly for a fee. The full balance with interest comes due when:
- You sell your home
- You move out
- The last borrower dies
- You default on the agreement
You or your estate usually get a limited time to repay, and each lender sets that window. FCAC warns that settling an estate can take longer than the time allowed. Ask about it before you sign, and tell your family.
Who offers reverse mortgages
FCAC names two federally regulated lenders as examples: HomeEquity Bank, which sells the CHIP Reverse Mortgage, and Equitable Bank. Provincially regulated institutions and mortgage brokers also arrange them. We don’t list rates here: they change often, and the lender’s own rate page is the place to check.
Who regulates the lender matters. Federally regulated banks come with protections under Canada’s Financial Consumer Protection Framework that you may not get from a provincially regulated lender. The federal regulator, OSFI, also expects the lenders it supervises to cap reverse mortgages at 65% of the home’s value at origination. In some provinces the lender may require you to get independent legal advice; even where it doesn’t, it’s worth getting.
Pros and cons
- No regular payments
- Turn home equity into cash without selling
- You still own your home
- Choice of a lump sum, staged draws or regular payments
- Tax-free, and no effect on OAS or GIS benefits
- Higher interest rates than a mortgage or HELOC
- The balance grows and your equity shrinks over time
- Your estate must repay within a set period, which may be shorter than settling the estate
- Less to leave to your children or other beneficiaries
Alternatives to compare first
FCAC suggests comparing other options before you commit, and talking them through with family and a financial advisor:
- Selling and buying a smaller home, renting, or moving into assisted living
- A home equity line of credit, which usually costs less but requires monthly payments and passing a stress test
- A new or larger mortgage, or a personal loan
| Reverse mortgage | HELOC | |
|---|---|---|
| Who it’s for | Homeowners usually 55 or older | Any homeowner with enough equity who qualifies |
| How much | Usually up to 55% of your home’s value | Up to 65% of your home’s value |
| Payments | None until you sell, move or the last borrower dies | Regular payments, at least the interest |
| Rate | Usually higher than a mortgage or HELOC | Usually variable, based on prime |
| Qualifying | Based mainly on age and the home | Income, credit and the stress test |
Frequently Asked Questions
What is a reverse mortgage?
It’s a loan for homeowners, usually 55 or older, that turns part of your home equity into tax-free money without selling. You make no regular payments; the loan and interest are repaid when you sell, move out or the last borrower dies.
How does a reverse mortgage work in Canada?
A lender appraises your home and lends you up to about 55% of its value, as a lump sum, staged draws or regular payments. Interest is added to the balance over time, and the whole amount comes due when the home is sold or no longer your residence.
How much can I borrow with a reverse mortgage?
FCAC says you can usually borrow up to 55% of your home’s current value. The exact amount depends on your age and that of others on title, the home’s type, condition and appraised value, and the lender.
How old do you have to be to get a reverse mortgage?
Usually 55 or older. The ages of everyone registered on the title are considered.
How does a CHIP reverse mortgage work?
CHIP is HomeEquity Bank’s reverse mortgage. It follows the same basic model: homeowners 55 and over can access up to 55% of their home’s value with no regular payments. Check its current rates and terms with HomeEquity Bank directly.
Do I have to make monthly payments on a reverse mortgage?
No. Regular payments aren’t required, though lenders usually let you pay down part of the balance and you can usually repay in full early, sometimes for a fee.
Is reverse mortgage money taxable?
No. FCAC says the money you borrow is tax-free and doesn’t affect Old Age Security or Guaranteed Income Supplement benefits.
Can I lose my home with a reverse mortgage?
Yes, if you default. Letting the home fall into disrepair, being dishonest on the application or breaking the contract’s conditions can lead to foreclosure.
What happens to a reverse mortgage when I die?
The balance with interest becomes due once the last borrower dies. Your estate usually has a limited time set by the lender to repay, often by selling the home.
Is a reverse mortgage better than a HELOC?
They suit different situations. A HELOC usually costs less but needs regular payments and income to qualify. A reverse mortgage needs no payments, but the rate is usually higher and the balance grows.
Try this next
Sources, checked October 2026
- FCAC: Reverse mortgages canada.ca
- FCAC: Borrowing against home equity canada.ca
- OSFI: Treatment of innovative real estate secured lending products under Guideline B-20 osfi-bsif.gc.ca
- HomeEquity Bank: CHIP Reverse Mortgage chip.ca
- FCAC: Home equity lines of credit canada.ca
General information for Canadians, not financial, tax or legal advice. Rules and menus change, so confirm details with your bank, lender or the Government of Canada. See our methodology.