Reverse Mortgages in Canada: Pros and Cons

You've spent decades paying the house off. A reverse mortgage lets the house return the favour, without selling it, and without a monthly payment. Like every financial tool, it's brilliant for some situations and wrong for others.

How it works

Canadian homeowners 55 and older can borrow generally up to 55% of the home's value, taken as a lump sum, regular deposits or both. No payments are required; interest accrues and the loan is repaid when you sell, move out permanently, or through the estate. You remain the owner and stay on title.

The pros

• Proceeds are tax-free and don't reduce OAS or GIS benefits.
• No required monthly payments, immediate breathing room for retirement cash flow.
• You keep your home, your neighbourhood and your independence.
• A negative-equity guarantee means you'll never owe more than the home's fair market value when it's sold, provided taxes and insurance are maintained.
• Funds can gift a 'living inheritance', helping kids with down payments while you're here to see it.

The cons

• Rates run higher than regular mortgages or HELOCs, and compounding interest grows the balance over time.
• Growing balance means shrinking equity, home appreciation offsets some, but the estate inherits less.
• Setup involves appraisal, legal and closing costs.
• Leaving the home (e.g., into long-term care) triggers repayment, which can force a sale on a timeline you didn't choose.

Who it fits

House-rich, cash-flow-tight homeowners who want to stay put, retirees replacing high-interest debt payments, and families making deliberate living-inheritance gifts. Who should look elsewhere first: anyone who qualifies comfortably for a cheaper HELOC, or who plans to move within a few years anyway.

The right answer comes from comparing a reverse mortgage against a HELOC, a refinance and downsizing, side by side, with your actual numbers. That comparison is exactly what a free call is for.

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