This reverse mortgage calculator helps you estimate how much money you can access as a loan secured against the value of your home. A reverse mortgage can provide tax-free income to help fund your retirement.
What is a Reverse Mortgage in Canada?
A reverse mortgage is a loan that allows Canadian homeowners aged 55 and older to borrow against the equity in their home without selling it or making monthly payments. You can access up to 55% of your home’s appraised value in tax-free cash. The loan, plus accumulated interest, is repaid only when you sell the home, move out permanently, or pass away.
While the loan is outstanding, you retain full ownership of your home and can continue living in it. Reverse mortgage proceeds are not considered taxable income, which means they do not affect your eligibility for Old Age Security (OAS) or the Guaranteed Income Supplement (GIS).
Who Offers Reverse Mortgages in Canada?
The two main providers of reverse mortgages in Canada are:
- HomeEquity Bank — Offers the CHIP Reverse Mortgage, the most well-known reverse mortgage product in Canada
- Equitable Bank — Offers its own reverse mortgage product as an alternative
Unlike the United States, Canada does not have a government-insured reverse mortgage program. All Canadian reverse mortgages are offered through private lenders.
How Much Can You Borrow With a Reverse Mortgage?
With a reverse mortgage in Canada, you can borrow up to 55% of your home’s appraised value. The exact amount depends on several factors:
| Factor | Impact on Borrowing Amount |
|---|---|
| Your age | Older borrowers qualify for a higher percentage |
| Spouse’s age | The younger spouse’s age is used in the calculation |
| Property location | Urban properties in stable markets qualify for more |
| Property type | Single-family homes typically qualify for more than condos |
| Property condition | Well-maintained homes receive higher appraisals |
| Current home value | Higher-value homes may access larger dollar amounts |
Reverse Mortgage Borrowing Example
| Home Value | Age 55 (~20%) | Age 65 (~30%) | Age 75 (~40%) | Age 85 (~50%) |
|---|---|---|---|---|
| $400,000 | $80,000 | $120,000 | $160,000 | $200,000 |
| $600,000 | $120,000 | $180,000 | $240,000 | $300,000 |
| $800,000 | $160,000 | $240,000 | $320,000 | $400,000 |
| $1,000,000 | $200,000 | $300,000 | $400,000 | $500,000 |
Percentages are approximate and vary by lender and individual circumstances.
You can receive the funds as a lump sum, in scheduled regular advances, or a combination of both. The flexibility to choose payment structure allows you to match cash flow to your needs.
Reverse Mortgage Interest Rates
Reverse mortgage interest rates in Canada are higher than conventional mortgage rates. As of 2026, typical reverse mortgage rates range from approximately 6.5% to 9%, compared to 4% to 6% for a standard mortgage.
| Product | Typical Interest Rate (2026) |
|---|---|
| Conventional fixed mortgage (5-year) | 4.0% – 5.5% |
| HELOC | Prime + 0.5% – 1.0% (~6.0% – 6.5%) |
| Reverse mortgage (fixed) | 6.5% – 9.0% |
| Reverse mortgage (variable) | 6.0% – 8.0% |
Because no monthly payments are made, interest compounds on the outstanding balance. This means the loan grows over time, reducing the equity in your home. Over a 10- to 20-year period, the compounding effect can be significant.
How Interest Compounds on a Reverse Mortgage
Example: $200,000 reverse mortgage at 7.5% interest with no payments.
| Year | Loan Balance |
|---|---|
| 0 | $200,000 |
| 5 | $287,000 |
| 10 | $412,000 |
| 15 | $591,000 |
| 20 | $849,000 |
Approximate figures assuming annual compounding at 7.5%.
This example illustrates why it is critical to understand how quickly a reverse mortgage balance can grow, particularly if you plan to stay in your home for many years.
Pros and Cons of a Reverse Mortgage
| Pros | Cons |
|---|---|
| No monthly mortgage payments required | Higher interest rates than conventional mortgages |
| Tax-free cash — does not affect OAS or GIS | Interest compounds, reducing home equity over time |
| You retain full ownership of your home | Reduced inheritance for heirs |
| Funds can be used for any purpose | Setup costs: appraisal, legal, and admin fees ($2,000–$3,000+) |
| You can never owe more than fair market value | Early repayment penalties in first 3–5 years |
| Available regardless of income level | Cannot borrow against the full value of your home |
| Flexible payout options (lump sum or scheduled) | Limited provider options in Canada |
When Does a Reverse Mortgage Make Sense?
A reverse mortgage may be appropriate if:
- You are house-rich but cash-poor — your home is your largest asset and you need income to cover living expenses
- You want to age in place and stay in your home rather than downsize
- You have no other affordable borrowing options — you may not qualify for a HELOC or traditional mortgage based on income
- You want to supplement retirement income without triggering OAS clawback or GIS reductions
- You need funds for home renovations to make your home accessible as you age
Alternatives to Consider First
Before committing to a reverse mortgage, evaluate these alternatives:
| Alternative | Key Advantage | Key Disadvantage |
|---|---|---|
| HELOC | Lower interest rates | Requires monthly payments and income qualification |
| Downsizing | Eliminates mortgage costs entirely | Requires moving; emotional/practical impact |
| Renting out part of your home | Generates ongoing income | Loss of privacy; landlord responsibilities |
| Line of credit | Flexible borrowing at lower rates | Requires income qualification; monthly payments |
| Government benefits (GIS) | Non-repayable income | Income-tested; may not provide enough |
How a Reverse Mortgage Affects Your Estate
One of the most important considerations is the impact on your heirs. Because interest compounds on the loan balance, the equity available to your estate decreases over time.
Estate Impact Example
Assume a home worth $700,000 today with a $200,000 reverse mortgage at 7.5% interest, and home appreciation of 3% per year:
| Year | Home Value | Loan Balance | Remaining Equity |
|---|---|---|---|
| 0 | $700,000 | $200,000 | $500,000 |
| 5 | $811,000 | $287,000 | $524,000 |
| 10 | $941,000 | $412,000 | $529,000 |
| 15 | $1,091,000 | $591,000 | $500,000 |
| 20 | $1,264,000 | $849,000 | $415,000 |
In this scenario, despite the home appreciating, the compounding loan steadily erodes the remaining equity. After 20 years, heirs would inherit approximately $415,000 in equity rather than the full home value. If interest rates are higher or home values stagnate, the equity erosion would be more dramatic.
By law in Canada, you can never owe more than the fair market value of your home at the time of sale. This “no negative equity guarantee” protects borrowers and their heirs.
Reverse Mortgage vs HELOC: Detailed Comparison
| Feature | Reverse Mortgage | HELOC |
|---|---|---|
| Age requirement | 55+ | None (must qualify) |
| Monthly payments | None required | Interest payments required |
| Income qualification | Not required | Required |
| Credit score | Less important | Important |
| Interest rate | 6.5% – 9.0% | Prime + 0.5% – 1.0% |
| Maximum borrowing | Up to 55% of home value | Up to 65% of home value |
| Interest compounding | Yes (on full balance) | Only on amount drawn |
| Repayment | When you sell, move, or pass away | Ongoing |
| Impact on cash flow | None | Monthly payment obligation |
| Risk of losing home | Very low | Possible if payments missed |
A HELOC is typically the better option if you can qualify and afford the monthly payments. A reverse mortgage is better suited for retirees with limited income who cannot service HELOC payments. Compare both options with our HELOC calculator and mortgage calculator.
Reverse Mortgage Eligibility in Canada
To qualify for a reverse mortgage in Canada:
- You must be at least 55 years of age (both spouses if applicable)
- The property must be your primary residence
- You must be a Canadian homeowner
- Eligible property types: single-family homes, townhouses, condominiums, and some semi-detached homes
- The home must be in good condition and located in a qualifying area
- Any existing mortgage or secured debt must be paid off using the reverse mortgage proceeds or from other funds at closing
Related Calculators
- Mortgage Calculator — Calculate regular mortgage payments
- HELOC Calculator — Compare home equity line of credit costs
- Mortgage Affordability Calculator — See how much home you can afford
- Retirement Calculator — Plan your overall retirement income
- OAS Calculator — Estimate Old Age Security payments
- CPP Calculator — Estimate Canada Pension Plan benefits
- Investment Calculator — Explore alternatives to borrowing against home equity