Reverse mortgage vs downsizing: which leaves you more?
Downsizing usually leaves more for you and your heirs than a reverse mortgage, because you stop paying interest; it costs selling fees, land transfer tax and moving, and means leaving your home. A reverse mortgage keeps you in place at the price of compounding interest. The gap grows the longer you live.
Figures as of November 1, 2026.Downsizing usually leaves more money because no interest compounds, but it isn't free: realtor commission (FCAC: typically 2–6%), legal fees, land transfer tax on the new home ($6,475 on a $500,000 Ontario purchase) and moving. A reverse mortgage costs nothing up front beyond about $3,070 and lets you stay, but the balance compounds.
What downsizing costs
The FCAC says realtor commissions "typically range from 2% to 6%" and are negotiable; it also lists legal fees, the mortgage discharge, repairs, staging and moving. Our engine uses 5% of the price for commission and staging, $1,500 legal on the sale, $1,800 legal and title costs on the purchase, $6,000 moving, and the province's transfer tax on the new home.
Transfer tax by province
| Province | Tax or fees |
|---|---|
| Ontario | $6,475 |
| British Columbia | $8,000 |
| Alberta | $550 |
| Quebec | $5,611 |
| Manitoba | $7,650 |
| Saskatchewan | $2,000 |
| Nova Scotia | $7,500 |
| New Brunswick | $5,000 |
| Prince Edward Island | $5,000 |
| Newfoundland and Labrador | $2,098 |
| Toronto (provincial + municipal) | $12,950 |
| Montréal | $5,611 |
Nova Scotia uses Halifax's 1.5% municipal rate here; other municipalities differ.
Worked example
A 70-year-old couple in Ontario with an $800,000 home and a $50,000 mortgage want $1,000 a month for life. Downsizing to $500,000, or staying with a reverse mortgage:
| Age | Reverse mortgage | HELOC | Downsize | Sell and rent |
|---|---|---|---|---|
| 80 | $747,990 | not possible | $779,165 | $469,265 |
| 85 | $725,846 | not possible | $845,166 | $273,651 |
| 90 | $653,077 | not possible | $919,632 | $5,289 |
| 95 | $573,595 | not possible | $1,069,647 | runs out at 90 |
| Monthly payment, year 1 | none | $244 | none | $2,600 |
| One-time costs | $2,270 | $800 | $55,775 | $47,500 |
Beyond the money
- A smaller, step-free home may suit you better at 85 than the family house.
- Moving away from neighbours, doctors and routines has real costs.
- Downsizing now keeps a reverse mortgage available later, on the smaller home.
What does downsizing cost, line by line?
| Cost | Amount | Where it comes from |
|---|---|---|
| Commission, staging and repairs | $62,500 | 5% of the price (FCAC: commission typically 2–6%) |
| Legal and mortgage discharge on the sale | $1,500 | our estimate |
| Land transfer tax on the condo | $26,950 | Ontario plus Toronto's municipal tax |
| Legal, title and adjustments on the purchase | $1,800 | our estimate |
| Moving | $6,000 | our estimate |
| Total | $98,750 |
That's $98,750, or 7.9% of the home's value, before a dollar is freed. Selling costs alone are $64,000. A reverse mortgage costs far less up front ($3,070) but keeps charging interest every year you stay.
When does staying win?
- When you'd buy a similar-priced home anyway (little equity freed, all the costs).
- When the move would cost you care, community or a spouse's comfort that a spreadsheet can't price.
- When you need the money for only a few years and will sell later anyway.
How does the engine compare the two fairly?
Both routes deliver the same money on the same dates. Downsizing pays it from the cash freed by the sale, invested at our 4% assumption until you need it; the reverse mortgage borrows it. At each age, "what is left" is the home's value after selling costs, minus anything owed, plus any invested cash. That puts the smaller home and its savings on one side and the bigger home and its loan on the other, in the same dollars.
Two common misconceptions
- "Downsizing is free money." In the Toronto example the costs come to $98,750, and a smaller home in the same city often costs more per square foot.
- "A reverse mortgage means losing the house." You keep title, and lenders promise you won't owe more than the home's value if you keep the terms; what you give up is equity, not ownership.
If you're unsure, there's a middle path: borrow now and downsize later. The engine shows what's left if you sell at 80 or 85.
| Home | $1,250,000Toronto |
|---|---|
| Wants | $150,000up front |
| Downsizing costs | $98,750includes $26,950 Ontario + Toronto land transfer tax |
| Reverse mortgage left at 90 | $1,545,719 |
| Downsize left at 90 | $1,789,842 |
| Difference at 90 | $244,123in favour of downsizing |
Open this example in the calculator →Computed by our engine with the lender terms and rules on the methodology page.Computed November 1, 2026.
What this means for you
If you'd be happy in a smaller home, downsizing is usually the cheaper way to free equity, even after transfer tax. If moving would cost you your community, care network or garden, the reverse mortgage's extra cost buys you staying.
Try your own city's transfer tax on the comparison.
Frequently asked questions
How much does it cost to downsize in Canada?
Typically 5–8% of the sale price once you add commission, legal fees, moving and land transfer tax on the new home. On an $800,000 Ontario sale and $500,000 purchase, our estimate is about $55,775.
Can I keep a reverse mortgage if I downsize?
Generally no: selling makes the loan due. Bloom's marketing has described a right to move the loan, but we couldn't confirm it on Bloom's own site.
Primary sources
- Financial Consumer Agency of Canada — Selling a home (costs, realtor commissions) (effective October 10, 2025). Checked .
- Government of Ontario — Calculating land transfer tax. Checked .
- Government of British Columbia — Property transfer tax. Checked .
- Government of Alberta — Land Titles and Surveys common documents fee schedule (effective October 1, 2026). Checked .
- LégisQuébec — Act respecting duties on transfers of immovables (D-15.1), s. 2. Checked .
- Government of Manitoba — Land transfer tax. Checked .
- Saskatchewan Registry Services (ISC) — Land titles fees table (effective April 15, 2026). Checked .
- Government of Nova Scotia — Municipal deed transfer tax rates (effective July 1, 2026). Checked .
- Government of New Brunswick — Real Property Transfer Tax Act, s. 2. Checked .
- Government of Prince Edward Island — Real Property Transfer Tax Act. Checked .
- Government of Newfoundland and Labrador — Registry of Deeds schedule of fees. Checked .
- City of Toronto — Municipal land transfer tax rates and fees (effective April 1, 2026). Checked .
- Ville de Montréal — How property transfer duties are calculated (effective January 1, 2026). Checked .