The Reverse Mortgage Guide (55+)

If you are an Ontario homeowner aged 55 or older, a reverse mortgage lets you turn some of your home equity into cash without selling your house and without making any required monthly payments. It can be a genuine lifeline, and it can also be an expensive way to borrow. The honest answer to "should I get one?" is always: it depends.

This guide walks through how a reverse mortgage actually works in Canada, how much you can access, what it costs compared with a HELOC, and what it means for your spouse and your estate. We have tried to be balanced, because the right tool for your neighbour may be the wrong one for you.

Mortgage Squad Advisors is licensed in Ontario under FSRA #13737. This is general, plain-English information for 2026, not legal or financial advice. Because a reverse mortgage is a long-term decision, we strongly recommend you get independent legal and financial advice before signing anything.

A reverse mortgage is a loan secured against your home for Canadian homeowners, usually aged 55 or older. You borrow against the equity you have already built, and the key feature is that there are no required regular payments¹. The home usually has to be your primary residence, which typically means living there at least six months a year. Instead, the interest is added to the loan balance over time, and the whole loan is repaid later, in one lump sum.

Repayment is triggered when the home is sold, when you move out (for example into long-term care), when the last borrower passes away, or if you default on the loan conditions, such as letting the home fall into disrepair¹. Until then, you simply live in your home as you always have, keeping up property taxes, insurance and maintenance.

Importantly, you still own your home the entire time. You are not selling to the bank. Federally regulated providers include HomeEquity Bank (which offers the CHIP Reverse Mortgage) and Equitable Bank, and reverse mortgages are also available through some provincially regulated institutions and mortgage brokers¹. You can receive funds as a lump sum, as regular advances, or a combination. You don’t pay tax on the money because it is borrowed, not earned, and it doesn’t affect Old Age Security or Guaranteed Income Supplement benefits¹.

You may usually borrow up to 55% of your home’s current value through a reverse mortgage¹. Few borrowers qualify for the full 55%; the actual amount depends on several factors:

• Your age: the older you are, the more you can usually borrow. A 55-year-old qualifies for a smaller percentage than an 80-year-old, because the lender expects the loan to run for fewer years.
• The ages of everyone registered on title, so the youngest owner usually sets the limit¹.
• Your property type, condition, and location within Ontario.
• The lender's own appraisal of your home's current market value.

As a rough mental model, someone in their mid-50s might access a low-double-digit percentage of their home's value, while someone in their 80s may approach the upper end. These are illustrations, not quotes. The only way to know your number is to request an estimate. You can start an application or ask Maya to point you in the right direction.

This is where balance matters most. A reverse mortgage usually carries a higher interest rate than a regular mortgage or a HELOC¹. Because you are not making payments, the lender adds the interest to the loan, so it compounds on itself and the balance can grow meaningfully over a long period.

Beyond the rate, expect other costs, which can include an appraisal fee, a set-up fee, legal fees, closing costs, and a prepayment penalty if you repay before the loan is due¹. How you draw the money matters too: a full lump sum means paying interest on the whole amount from day one. These costs vary by lender and are worth confirming in writing before you commit.

A HELOC (home equity line of credit) is the most common alternative, and it is usually cheaper on rate. The trade-offs:

• A HELOC requires income to qualify and you must make at least interest payments each month; miss them and you risk default.
• A reverse mortgage has no required regular payments, and the amount is based mainly on your age and your home rather than on your ability to make payments. That is exactly why it appeals to retirees on a fixed income, but you pay for that flexibility with a higher rate.

If you have reliable income and could comfortably handle payments, a HELOC or a refinance may cost you far less over time. If payments are the problem, the reverse mortgage's structure is the point. Run both side by side before deciding.

The most common worry is "will the bank take the house from my kids?" The honest answer: the home is not taken, but the loan must be repaid, and that repayment usually comes from selling the home or refinancing it after you are gone.

When the loan comes due, your estate repays the original amount borrowed plus the accumulated interest. Whatever equity is left over after that belongs to your estate and your heirs. Because interest compounds with no payments, the longer the loan runs, the more it consumes, which means less inheritance than if the home were owned outright. Your estate also usually has a limited time to repay, and settling an estate can take longer than that window¹, so ask the lender for its repayment deadline in writing.

Some reverse mortgage lenders offer a "no negative equity" guarantee: if you meet the loan conditions, your estate won’t owe more than the home’s fair market value when it is sold. Terms differ, so ask whether your lender offers one and get the conditions in writing. Talk with your family early so there are no surprises later.

If you are married or living common-law, this section is essential. To make sure the surviving partner can stay in the home, both spouses should be on title and both should be on the reverse mortgage.

Here is why it matters: repayment is typically triggered when the last borrower moves out or passes away. If only one spouse is named on the loan and that spouse dies or moves into care, the loan can become due, potentially forcing the surviving partner to repay or sell at the worst possible time.

When both partners are borrowers, the survivor can continue living in the home with no payment obligation for as long as they remain there and meet the loan conditions. If your spouse is not currently on title, raise this with your lawyer before the reverse mortgage is set up. This is one of the most common and most costly mistakes, and it is entirely avoidable.

Before committing to any borrowing, it is worth honestly comparing a reverse mortgage with simply downsizing, that is, selling your current home and buying something smaller or cheaper.

• Downsizing can free up a large chunk of equity in cash, eliminate the higher reverse-mortgage interest cost entirely, and lower your ongoing maintenance and property taxes. The downsides are real too: moving costs, land transfer tax, realtor fees, and the emotional weight of leaving a home full of memories.
• A reverse mortgage lets you stay in the home you love and your community, with no monthly payments, but at a higher borrowing cost that erodes future equity.

A useful way to frame it: if your main goal is to stay put, a reverse mortgage (or a HELOC, if you can carry payments) is the conversation. If you are open to moving and want to maximize the cash you keep, downsizing is often the cheaper path. There is no universally correct answer, only the one that fits your health, finances, and what "home" means to you.

A reverse mortgage can be the right tool to fund a comfortable retirement without selling, and it can also be an expensive choice that a HELOC or downsizing would beat. The difference is in the details of your age, your income, your home's value, and your family's plans.

Before you sign anything, get independent legal and financial advice so the decision is genuinely yours; some lenders require independent legal advice anyway¹. When you are ready to map your numbers to the right path, you can contact our team or ask Maya any question along the way. Mortgage Squad Advisors, FSRA #13737, is here to make the math, and the conversation, easy.