What the Financial Consumer Agency of Canada says about reverse mortgages
The Financial Consumer Agency of Canada says reverse mortgages cost more than regular mortgages, that the interest compounds, that set-up and prepayment costs can be high and that a lump sum you don't need right away may be an expensive way to borrow. It suggests comparing alternatives and getting independent legal advice.
Figures as of November 1, 2026.The FCAC, the federal consumer agency for banks, says reverse mortgages are usually for owners 55+, let you borrow up to 55% of your home's current value, usually cost more in interest than a mortgage or HELOC, can reduce your equity as interest builds, and must be repaid when you sell, move out, die or default. It tells you to compare alternatives and ask about every fee.
This is our summary of the FCAC's reverse mortgages page (page date October 15, 2025), with links to where this site shows the numbers. Read the original too.
The key points
- Reverse mortgages are usually for homeowners 55 or older, and the home must usually be your primary residence, which typically means living there at least 6 months a year.
- You can borrow up to 55% of the current value of your home. The amount depends on the ages of everyone on title, the home's condition, type and appraised value, and the lender.
- You don't pay tax on the money, and it doesn't affect Old Age Security or the Guaranteed Income Supplement.
- The loan is repaid when the home is sold, you move out, the last borrower dies, or you default.
- Some provinces and territories require independent legal advice; elsewhere you may still want it. (Every lender we reviewed requires it anyway.)
Costs the FCAC lists
Interest rates are usually higher than for a regular mortgage or a HELOC, and interest compounds onto the balance. Costs can include an appraisal, set-up and legal fees, closing costs and prepayment penalties; some are added to the balance and some are paid up front. Taking money in parts may bring a fee, and the lender may change the rate. For the dollar amounts, see costs and fees.
Risks it warns about
- Your equity may go down as interest accumulates (see what you'd owe by age).
- A lump sum you don't use right away may be an expensive way to borrow (see lump sum vs monthly).
- Default, for example letting the home fall into disrepair or breaking the contract, could lead to foreclosure.
- When you die, your estate may need to repay within a set period, and settling an estate can take longer than that.
Questions it says to ask
- What are all the fees, including penalties for repaying early?
- How will I receive the money, what are the minimums, and can the interest rate change?
- When is repayment due, and what happens if it's late?
- What counts as a default?
- Are there restrictions on how I use the money?
We've expanded these into a printable list for your lawyer: questions for your lawyer.
Alternatives it suggests
The FCAC lists downsizing, renting, assisted living, a HELOC, a regular mortgage or refinance, and a personal loan. Our comparison engine runs the four that use your home: reverse mortgage, HELOC, downsizing and selling to rent.
If something goes wrong
Start with the lender's complaint process. For a federally regulated bank, you can then go to its external complaints body, and the FCAC accepts complaints about banks' compliance with consumer protection rules.
Where each FCAC point is covered on this site
| FCAC point | Test it with |
|---|---|
| Interest rates are higher than a regular mortgage | Rates guide |
| Interest compounds; equity can shrink | Balance by age |
| A lump sum you don't need yet is expensive | Lump sum vs monthly |
| Prepayment charges can be high | Early repayment cost |
| Compare alternatives | Four-route comparison |
| Get independent legal advice | Questions for your lawyer |
| Total needed | $120,000over 10 years |
|---|---|
| Up front | 6.49%CHIP lump sum |
| Monthly | 7.04%EQ Flex scheduled advances |
| Owed at the end, all up front | $378,849 |
| Owed at the end, monthly | $300,046 |
| Less owed by taking it monthly | $78,803to age 90 for a 72-year-old |
Open the lump sum vs monthly calculator →Computed by our engine with the lender terms and rules on the methodology page.Computed November 1, 2026.
What this means for you
The regulator's advice is practical: borrow only what you need when you need it, compare the alternatives and read the contract with your own lawyer. In the example, drawing monthly instead of all at once leaves tens of thousands more for later, even at a higher scheduled-advance rate.
The lawyer questions page turns FCAC's checklist into what to ask.
Frequently asked questions
Does the government guarantee reverse mortgages?
No. The FCAC publishes guidance and oversees federally regulated banks' consumer obligations; it doesn't guarantee loans. HomeEquity Bank and Equitable Bank are federally regulated.
Does the FCAC recommend reverse mortgages?
It doesn't recommend for or against. It explains how they work, lists costs and risks, and suggests comparing alternatives such as downsizing, a HELOC or a regular mortgage.
Primary sources
- Financial Consumer Agency of Canada — Reverse mortgages (effective October 15, 2025). Checked .
- Financial Consumer Agency of Canada — Home equity lines of credit. Checked .