How it works
Homeowners aged fifty-five and older can borrow against their principal residence and make no regular payments. The loan and accrued interest are repaid when the home is sold, when the last borrower moves out permanently, or on death. The amount available depends on age, property type, location, and appraised value.
The cost is compounding, not just the rate
Reverse mortgage rates are higher than conventional mortgage rates, and because nothing is paid monthly, interest is added to the balance and then earns interest itself. Over a long horizon the balance can grow substantially. Ask for an amortization projection at five, ten, and fifteen years before signing anything.
- Setup, appraisal, and legal fees apply at the start
- Interest compounds because no payments are made
- Prepayment penalties can apply if you exit early
The protections that do exist
Canadian reverse mortgages carry a no-negative-equity guarantee: provided obligations such as taxes, insurance, and maintenance are met, you will not owe more than the fair market value of the home at the time of sale. You keep title and you cannot be forced to move while it remains your principal residence.
Alternatives worth pricing first
A conventional refinance or a home equity line of credit is far cheaper if income supports the payments. A conventional mortgage with interest-only payments, downsizing, or a family loan can all outperform a reverse mortgage. It becomes the right tool mainly when income cannot support any payment and staying in the home is the priority.
Involve the family and an accountant
Because repayment ultimately comes from the estate, adult children are affected. Bring them into the conversation early. An accountant should also review the effect on income-tested benefits and on the estate plan.
Frequently asked questions
- Can the lender take my home?
- Not while it remains your principal residence and you keep taxes, insurance, and maintenance current. Repayment is triggered by sale, permanent move, or death.
- How much can I borrow?
- A percentage of appraised value that rises with age. Older borrowers qualify for more.
- Is a HELOC better?
- Usually cheaper, if you can qualify and make the payments. That qualification is exactly what pushes some retirees toward a reverse mortgage.
Talk to a Toronto private mortgage specialist
We arrange equity-based financing across Toronto and the GTA, whether you need a first position from a private lender or a second mortgage behind the bank you already have.