A reverse mortgage lets Canadian homeowners aged 55 and older turn part of their home equity into tax-free cash without selling the home or making monthly mortgage payments. For retirees who are house-rich but cash-poor, it can be a practical way to fund retirement, but the costs are significant. This page is part of our guide to mortgage types and features; to estimate your own borrowing amount and balance, use the reverse mortgage calculator.
What Is a Reverse Mortgage?
A reverse mortgage is a loan secured against your home that doesn’t require monthly payments. Instead of falling over time like a regular mortgage, the balance grows as interest compounds on it. The loan is repaid when you sell the home, move out permanently or die.
Key features:
- You must be 55 or older (both spouses, if the loan is joint)
- You keep ownership and title of your home
- No monthly mortgage payments are required
- You must maintain the property, pay the property taxes and keep home insurance
- The loan is repaid from the eventual sale of the home
How Much Can You Borrow?
A reverse mortgage usually lets you borrow up to 55% of the appraised value of your home, and the actual amount depends on several factors. Age matters most: older borrowers qualify for a higher percentage because the loan is expected to run for a shorter time.
Approximate borrowing amounts by age
| Age | Approximate % of Home Value | Amount on $600,000 Home |
|---|---|---|
| 55 | 15%-20% | $90,000-$120,000 |
| 60 | 20%-25% | $120,000-$150,000 |
| 65 | 25%-35% | $150,000-$210,000 |
| 70 | 30%-40% | $180,000-$240,000 |
| 75 | 40%-50% | $240,000-$300,000 |
| 80 | 45%-52% | $270,000-$312,000 |
| 85+ | 50%-55% | $300,000-$330,000 |
If both spouses are on the mortgage, the amount is based on the younger spouse’s age. Location matters too: homes in major urban centres typically qualify for more than rural properties.
Reverse Mortgage Providers in Canada
HomeEquity Bank: CHIP Reverse Mortgage
HomeEquity Bank has offered the CHIP Reverse Mortgage since 1986 and is the best-known provider in Canada. CHIP stands for Canadian Home Income Plan.
- Available across all Canadian provinces
- Fixed-rate terms of 1, 3 and 5 years, plus a variable-rate option
- Borrow as a lump sum, scheduled advances or a combination
- A no-negative-equity guarantee: a term of the product under which you won’t owe more than your home is worth, subject to its conditions
Equitable Bank
Equitable Bank offers a competing reverse mortgage.
- Available in select provinces
- Fixed-rate terms available
- A comparison point for rates and terms against CHIP
Reverse Mortgage Rates
Reverse mortgage rates are higher than standard mortgage rates because the lender receives no payments during the life of the loan. The rate you’re offered depends on the term, your age, the loan-to-value ratio, the property’s location and the lender. Rates change with the market, so each lender’s current rates by term are the ones to compare; rates for regular mortgages are on our mortgage rates pages.
Costs of a Reverse Mortgage
There are no monthly payments, but there are upfront and ongoing costs.
| Cost | Typical Amount |
|---|---|
| Home appraisal | $300-$600 |
| Independent legal advice | $300-$500 |
| Closing legal fees | $1,000-$2,000 |
| Setup / administration fee | $0-$1,795 (varies by lender) |
| Title insurance | $200-$400 |
| Prepayment penalty (if repaid early) | Varies by lender and term |
| Ongoing interest | Compounds on the balance: this is the major cost |
How Interest Compounds: A Worked Example
Because you make no payments, interest is added to the balance, and you then pay interest on that interest.
$200,000 reverse mortgage at an illustrative 6.50%
| Year | Balance Owing | Interest Added That Year |
|---|---|---|
| 0 | $200,000 | |
| 5 | $274,017 | $16,724 |
| 10 | $375,427 | $22,913 |
| 15 | $514,368 | $31,393 |
| 20 | $704,729 | $43,012 |
Annual compounding, no payments or further advances.
After 10 years you owe $375,427 on a $200,000 loan, nearly double. After 20 years the balance has more than tripled. That is why a reverse mortgage tends to suit shorter horizons or homeowners with substantial equity. A no-negative-equity guarantee caps what you owe at the home’s value, but the compounding can still use up much of the equity you or your heirs would otherwise receive; the reverse mortgage calculator shows how this plays out against a rising home value.
Pros and Cons
| Pros | Cons |
|---|---|
| Access home equity without selling | Interest compounds, so the balance grows fast |
| No monthly mortgage payments | Higher rates than standard mortgages |
| Stay in your home | Reduces the inheritance for heirs |
| Tax-free proceeds | Upfront setup costs ($1,500-$4,000+) |
| Does not affect OAS or GIS | Limited to a share of the home’s value |
| No-negative-equity guarantee | Prepayment penalties if repaid early |
| Funds as a lump sum or over time | Few providers, so less competition on rates |
Alternatives to a Reverse Mortgage
| Option | Monthly Payment? | Access to Equity | Key Trade-Off |
|---|---|---|---|
| Reverse mortgage | No | Up to 55% of the value | Balance grows, less inheritance |
| HELOC | Yes (interest-only minimum) | Limited as below | Must make monthly payments and qualify on income |
| Home equity loan or refinance | Yes (principal and interest) | Limited as below | Fixed payments required |
| Downsize | No | The whole home’s equity | Must move |
| Rent out part of the home | No | Partial (rental income) | Loss of privacy |
| Sell and rent | No | The whole home’s equity | No longer a homeowner |
At a federally regulated lender, two limits apply: the revolving part of a HELOC can't exceed 65% of the home's value, and everything borrowed against the home (the mortgage plus the HELOC, or a refinanced mortgage) can't exceed 80% of its value. HELOC room is therefore the lower of 80% of the value minus the mortgage and 65% of the value. Mortgage insurance can't take a refinance above 80%, except a refinance to build secondary suites that takes no equity out. How a HELOC, a home equity loan and a refinance compare is in mortgage vs home equity loan vs HELOC. A HELOC usually costs less in interest but needs monthly payments; downsizing frees the most money but means leaving your home.
When a Reverse Mortgage Can Make Sense
- Supplementing retirement income. If pension, CPP, OAS and investment income don’t cover expenses, a reverse mortgage provides tax-free cash.
- Paying for renovations or accessibility changes. Aging in place often needs wider doorways, stairlifts or bathroom changes, which a reverse mortgage can fund without monthly payments.
- Paying off existing debt. Using a reverse mortgage to clear a regular mortgage, credit card debt or a line of credit removes those monthly payments.
- Staying in the home. If you want to stay in a home or community you’re attached to, a reverse mortgage lets you stay while using the equity.
- Bridging to other income. If you plan to start CPP or OAS later for higher benefits, a reverse mortgage can cover the gap years.
Tax Implications
Reverse mortgage proceeds are not taxable income. The money you receive is a loan, not earnings, so it doesn’t appear on your tax return. That means:
- No increase in your marginal tax rate
- No OAS recovery tax (clawback) from the proceeds
- No reduction in GIS from the proceeds
- No effect on the age amount, the Canada Groceries and Essentials Benefit (formerly the GST/HST credit) or other income-tested benefits
Withdrawals from RRSPs, RRIFs and other registered accounts, by contrast, count as income and can raise your tax rate and trigger the OAS clawback. What happens to those accounts at death is covered in what happens to an RRSP when you die.
Impact on Government Benefits
Because reverse mortgage advances are a loan, not income, they don’t affect:
- Old Age Security (OAS): no clawback is triggered
- Guaranteed Income Supplement (GIS): no reduction in benefits
- Provincial income-tested benefits: no effect on drug plans, property tax deferrals or other programs tied to net income
This matters most for GIS recipients, because the GIS shrinks as taxable income rises; how fast depends on your income and whether you have a spouse, as explained in how much you can earn on GIS. Income earned by investing the proceeds is still taxable and does count.
The Bottom Line
A reverse mortgage is a legitimate tool for homeowners aged 55 and older who want to use their home equity without selling or making monthly payments. The trade-off is plain: tax-free cash now, in exchange for compounding interest that steadily reduces your equity. Borrowing only what you need, seeing how fast the balance grows and comparing a HELOC or downsizing first gives a clear picture before committing.
Related Resources
Sources
The figures and rules on this page come from these sources, last checked against them between September 29, 2026 and October 1, 2026. How we check facts.
- CMHC: CMHC Refinance for Building Secondary Suites
- Financial Consumer Agency of Canada: Borrowing against home equity
- Financial Consumer Agency of Canada: Home equity lines of credit
- Justice Laws (Canada): Bank Act
- Justice Laws (Canada): Eligible Mortgage Loan Regulations
- OSFI: Residential mortgage underwriting practices and procedures