What Is a Reverse Mortgage?
A reverse mortgage is a financial product that allows Canadian homeowners aged 55 and older to access up to 55% of their home’s value in tax-free cash—without having to sell, downsize, or make monthly payments.
Unlike traditional mortgages, where you make payments to the lender, a reverse mortgage pays you. You only repay the loan when you move, sell your home, or pass away.
Key Highlights:
Keep ownership of your home
Receive tax-free money
No monthly mortgage payments required
For a detailed definition, visit the Wikipedia article on Reverse Mortgages.
Who Qualifies for a Reverse Mortgage in Canada?
Not everyone is eligible. The basic criteria for a reverse mortgage in Canada include:
Age: You (and your spouse, if applicable) must be at least 55 years old
Homeo ownership: You must own your primary residence in Canada
Home value: The home must have sufficient equity
Location: Eligible properties are usually in urban or suburban areas.
Lenders will also consider your property type, condition, and location before approving the loan.
You can read more about eligibility at Canada.ca – Reverse Mortgages.
Pros and Cons of Reverse Mortgages
Before applying, it’s important to weigh the advantages and disadvantages.
✅ Pros
Tax-free funds for any purpose
Stay in your home without monthly payments
Flexible payout options: lump sum, installments, or combination
No negative equity guarantee (you’ll never owe more than your home’s value)
❌ Cons
Interest accumulates, reducing your home equity over time
Fees and closing costs can be higher than conventional loans
Limited borrowing amount (up to 55% of home’s value)
Reduces inheritance for your heirs
How Does a Reverse Mortgage Affect Your Heirs or Estate?
When you pass away or sell the home, the reverse mortgage must be repaid, typically from the proceeds of the home sale.
Key Impacts:
Heirs may receive less inheritance
Estate must settle the loan balance, including accumulated interest
If the home’s value exceeds the loan, the surplus goes to your heirs.
If the home sells for less, a no negative equity guarantee protects your estate.
Reverse Mortgage vs. Home Equity Loan
While both options let you access home equity, they are fundamentally different:
| Feature | Reverse Mortgage | Home Equity Loan |
| Age Requirement | 55+ | No specific age |
| Monthly Payments | Not required | Required |
| Repayment Timeline | Upon sale, move, or death | Regular fixed terms |
| Loan Amount | Up to 55% of home value | Depends on income & credit |
Reverse mortgage is best for retirees who want financial flexibility without monthly obligations.
Home equity loans suit those with stable income and the ability to make monthly repayments.
Frequently Asked Questions (FAQ)
Is the money from a reverse mortgage taxable?
No. The money you receive is tax-free and doesn’t affect your government benefits like OAS or CPP.
Can I pay off the loan early?
Yes. But early repayment fees may apply depending on the lender and terms.
Will I still own my home?
Absolutely. You remain the homeowner, and the title stays in your name.
What happens if I move into long-term care?
If the home is no longer your primary residence, the loan becomes due—usually within 6 to 12 months.Final Thoughts
A reverse mortgage can be a lifeline for retirees looking to boost their income, cover expenses, or enjoy their golden years without financial stress. However, it’s not a one-size-fits-all solution. Understanding the implications and speaking to a trusted mortgage advisor is key.
Ready to Learn More?
If you're 55+ and wondering if a reverse mortgage is right for you, contact me today on (437)684-3333 for a free consultation. Let’s explore how to make your home equity work for you—without leaving the home you love. More in-depth post
