Reverse mortgage vs HELOC: which costs less, and which is safer?
A HELOC charges less interest than a reverse mortgage and keeps more equity, but it needs income to qualify, monthly interest payments (or the line fills up with interest), and its rate can change at any time. A reverse mortgage needs no income and no payments, at about two points more.
Figures as of November 1, 2026.A HELOC is cheaper: about 5.20% (prime 4.70% plus a typical premium) against 6.49% for a 5-year reverse mortgage. But a HELOC needs at least the interest every month ($653 on $150,000), income to pass the stress test at 7.20%, and the bank can reduce or freeze it. A reverse mortgage needs no payments and no income test, and can't be cut once advanced.
Side by side
| Reverse mortgage | HELOC | |
|---|---|---|
| Rate today | 6.49% 5-yr fixed (CHIP special) | about 5.20% variable |
| Payments | None required | At least the interest, monthly |
| Qualifying | Age, home, location | Income, credit, stress test at max(rate + 2, 5.25%) |
| Limit | Up to 55–59%, by age | Up to 65% (OSFI B-20) |
| Lender can cut it? | No (once advanced) | Yes (unused room) |
| Owe more than the home? | No, under the guarantee | Yes, you owe any shortfall |
| Set-up | About $3,070 | Often under $800 (estimate) |
The cost difference
A 70-year-old borrows $150,000 either way and sells at 85, with 3% home growth.
| Age | Reverse owed | HELOC owed | HELOC interest paid so far | Left: reverse | Left: HELOC |
|---|---|---|---|---|---|
| 75 | $207,437 | $150,800 | $39,208 | $673,612 | $687,003 |
| 80 | $293,885 | $150,800 | $78,416 | $727,492 | $774,716 |
| 85 | $416,359 | $150,800 | $117,624 | $767,696 | $873,380 |
"Left: HELOC" subtracts the interest paid, grown at 4%, so both columns measure the same thing: what the household is worth because of this decision.
Can you qualify for the HELOC?
Federally regulated lenders must qualify you at the greater of your rate plus 2 points or 5.25% (OSFI). On $150,000 at 5.20%, that's 7.20%. If the lender tests the amount over 25 years (practice varies), the test payment is about $1,085 a month, which on its own needs roughly $33,389 a year of gross income at a 39% housing ratio, before property tax and heating. Check your own with the stress test calculator or HELOCCalculator.ca.
Risks people overlook
- HELOC payment shock. Variable rates rise with prime; the Bank of Canada raised its policy rate on October 29, 2026.
- HELOC limit cuts when you might need the room most.
- Reverse-mortgage compounding, especially if you're young: the HELOC limit is $520,000 on an $800,000 home, while our reverse estimate at 60 is only 28% of value.
Using both, in order
Some households use a HELOC while they can comfortably pay the interest, then switch to a reverse mortgage later (which pays off the HELOC at closing) when payments become a burden and they qualify for a larger share by age. Model both stages by running the engine at your age today and again ten years on.
How much interest does the HELOC cost as you age?
| Age | Paid monthly: interest | Drawn from the line: owed |
|---|---|---|
| 75 | $666/mo | $198,303 |
| 80 | $874/mo | $311,724 |
| 85 | $1,082/mo | $458,740 |
Paying the interest keeps the line from growing, but the payment rises as you keep drawing. Drawing the interest from the line instead means no payments, but the balance compounds like a reverse mortgage at a lower rate, and it reaches the 65% limit at about 87; then the interest must be paid every month.
What can a lender do with a HELOC that it can't with a reverse mortgage?
A HELOC's rate can change at any time (FCAC: "your lender may change your interest rate at any time", with written notice from federally regulated lenders), and like any mortgage it must be repaid when you sell, and the lender can take the home if you don't pay. A reverse mortgage can't be called while you meet its terms (live in the home, pay property tax and insurance, keep it in repair). For someone who needs the money for the rest of their life, that certainty is part of what the higher rate buys.
| Home | $480,000condo |
|---|---|
| Income | $30,000pensions |
| Needs | $1,200 a month for life |
| HELOC: income a lender tests for | $38,437payment $1,249/month at 7.20% |
| HELOC verdict | not possible on her income |
| Reverse mortgage (Income Advantage) left at 90 | $367,226 |
| Route that works for her | the reverse mortgage (or 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 have the income and can pay the interest, a HELOC is usually cheaper. If you need the money because income is short, a HELOC may not be approved at all, and drawing its interest from the line fills it up within years.
The comparison now tests HELOC qualification on the income you enter and can add HELOC interest to the line: try both on the widow's example.
Frequently asked questions
Is a HELOC better than a reverse mortgage for seniors?
If you can qualify and comfortably pay the interest every month, a HELOC usually costs less. If you can't, or you don't want a payment, a reverse mortgage is designed for that situation.
Can a bank freeze my HELOC?
Yes. A HELOC is a revolving line and lenders can reduce or freeze unused room, for example if your home's value or finances change. Money already advanced from a reverse mortgage can't be called back while you keep the terms.
Primary sources
- OSFI — Guideline B-20: Residential mortgage underwriting practices and procedures. Checked .
- OSFI — Minimum qualifying rate for uninsured mortgages (effective January 29, 2026). Checked .
- Financial Consumer Agency of Canada — Home equity lines of credit. Checked .
- HomeEquity Bank — CHIP Reverse Mortgage rates (special rates as of October 29, 2026) (effective October 29, 2026). Checked .
- EQ Bank (Equitable Bank) — Reverse mortgage comparison and rates (prime 4.70% as of October 29, 2026) (effective October 29, 2026). Checked .
- Financial Consumer Agency of Canada — Reverse mortgages (effective October 15, 2025). Checked .