What is a reverse mortgage, and how does it work in Canada?

How it works, step by step

1. You apply. Every owner on title must be at least 55 and the home must be your principal residence (HomeEquity Bank requires you to live there at least 6 months a year).
2. The lender orders an appraisal and sets the most it will lend. That depends on the youngest owner's age, the appraised value, the location and the type of home.
3. You see your own lawyer for independent legal advice. Lenders require it; take our questions for your lawyer.
4. At closing, any existing mortgage is paid off first, so the reverse mortgage is the only mortgage on the home. The lender's fee (HomeEquity Bank's is $1,795 for most clients) comes out of the proceeds.
5. You receive the money: a lump sum (at least $25,000 with CHIP and EQ Bank), later lump sums, or scheduled monthly or quarterly advances.
6. Interest is added to the balance, compounding, until the loan is repaid. You may pay some or all of the interest if you want to.
7. The loan becomes due when the home is sold, the last borrower moves out permanently (for example into long-term care), the last borrower dies, or the terms are broken.

What you'd owe over time

This is the part most calculators skip. With no payments, the balance grows by compound interest. At HomeEquity Bank's 6.49% 5-year special rate, compounded twice a year, it doubles about every 10.9 years:

Real rates won't stay put: terms renew at the lender's posted rate, which today is higher (7.09% for CHIP's 5-year). Your home's value may grow too, which is why the comparison engine follows both together.

Who offers them

The FCAC names two federally regulated providers: HomeEquity Bank (CHIP, Income Advantage, CHIP Max, CHIP Open) and Equitable Bank, now marketed as EQ Bank (Flex Lite, Flex, Flex Plus). Bloom Finance, licensed in Ontario, BC and Alberta, also lends. HomeEquity Bank lends in all ten provinces; EQ Bank in cities and most large towns in Ontario, Alberta, BC and Quebec. Rates and terms are compared on the lender guide. Mortgage brokers can arrange them too.

What you must keep doing

You can stay as long as you keep the loan terms. The lenders spell them out: pay your property taxes, keep the home insured, keep it in reasonable repair, pay condo fees if you have them, and keep living there. HomeEquity Bank lists unpaid taxes, lapsed insurance, unpaid condo fees and bankruptcy as default causes. The FCAC warns that a default "could" lead to foreclosure. The lenders' no-negative-equity guarantees also depend on these terms.

What a reverse mortgage is not

• Not free money. Rates run about 1.9 points above the Bank of Canada's average new 5-year mortgage rate (4.58%), plus about $3,070 in set-up costs.
• Not a sale. You keep the home and any rise in its value; the lender is owed only the balance.
• Not a HELOC. A HELOC needs monthly payments and income to qualify and the bank can cut the limit. See reverse mortgage vs HELOC.
• Not permanent if you move. If the home stops being your principal residence, the loan becomes due.

How is a reverse mortgage different from a regular mortgage?

Reverse mortgage vs a regular mortgage (Canada)

	Reverse mortgage	Regular mortgage or HELOC
Monthly payments	None required	Required (HELOC: at least the interest)
Income test	No minimum income (age, home and location set the amount)	Stress test on income
Most you can borrow	Up to 55% of value (59% for some at 70+)	Up to 80% (HELOC up to 65%)
Rate, 5-year fixed	6.23% to 6.49% for most borrowers	4.58% average new uninsured 5-year+ (2026-08)
Balance over time	Grows: interest is added	Falls as you pay
When repaid	When the last borrower sells, moves out or dies	On a schedule

What happens to the balance over the years?

In the worked example below, the 72-year-old owes $141,848 at 77, $200,962 at 82 and $284,712 at 87 on a $100,000 advance, because interest compounds at 6.49% and then 7.09% after the first five years. Over the same years the house grows from $700,000 to $1,090,577 at our 3% assumption, so the equity left falls more slowly than the loan grows. If house prices stall, the equity falls faster.

A 72-year-old in Ottawa borrows $100,000: inputs, steps and result

Home	$700,000Ottawa house
Age	72
Product	HomeEquity Bank CHIP6.49% for 5 years, then 7.09%
Most CHIP may advance	$308,000our estimate, 44% at 72
Set-up costs added	$3,070
Owed at 82	$200,962
Owed at 92	$403,363
Left for you or your estate at 92	$797,701home grown 3% a year, after 5% selling costs

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 need money and want to stay in your home, a reverse mortgage is one way to get it without a monthly payment. The price is compounding interest: in the example the balance roughly doubles in a decade, so the earlier you borrow, the less is left later.

Before you call a lender, compare it with a HELOC, downsizing and selling on the four-route comparison, using your own age and home.