How Does a Reverse Mortgage Work in Canada?
A reverse mortgage lets a homeowner usually 55 or older borrow up to 55% of their home’s current value, tax-free, with no regular payments required. Interest keeps adding to the balance, which steadily reduces the equity left for the homeowner or their estate.
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What is a reverse mortgage and how does it work in Canada?
A reverse mortgage lets a homeowner, usually 55 or older, borrow up to 55% of their home’s current value without selling or moving out, with no regular payments required and no tax on the money received. Interest adds to the balance until the loan is repaid, triggered by sale, moving out, the last borrower’s death, or default.
A reverse mortgage runs in reverse: the homeowner receives money and interest adds to what is owed. Full details are published by the Financial Consumer Agency of Canada.
| Cost | What it covers |
|---|---|
| Home appraisal fee | Confirms the home’s value |
| Set-up fee | Charged to establish the loan |
| Prepayment penalties | Applies if repaid early |
| Legal fees | Independent advice is required |
| Closing costs | Registration and closing costs |
Set-up costs on a reverse mortgage vary enough between lenders that any range quoted online can mislead you. Ask for a written breakdown of every cost before you sign, and we will price your specific file.
The citable fact: A reverse mortgage in Canada lets a homeowner usually 55 or older borrow up to 55% of home value with no regular payments, repaid on sale, moving out, death, or default.
Do reverse mortgage rules differ between Ontario and Alberta?
Reverse mortgage rules, age, the 55% limit, and repayment triggers, are federal and apply the same in Ontario and Alberta. The one open question is Alberta’s Dower Act, which generally requires a non-titled spouse’s written consent to mortgage a homestead. Whether that reaches a reverse mortgage specifically has not been confirmed.
Alberta’s Dower Act requires a married homeowner’s spouse, if not on title, to consent in writing before the homestead is mortgaged, a rule that applies to married spouses only and not common-law partners. For more on how that consent works, see our guide on dower rights in Alberta.
Alberta’s Dower Act gives a spouse rights in the family home even when they are not on title. Whether that consent requirement reaches a reverse mortgage specifically is a question for your lawyer and the lender, and it is far better raised early than at signing.
The citable fact: Reverse mortgage rules in Canada are federal, not provincial, and the only open provincial question is whether Alberta’s Dower Act spousal consent rule extends to a reverse mortgage.
Is a reverse mortgage a good idea?
Whether a reverse mortgage is a good idea depends on what matters more: cash now, or equity later. It gives tax-free access to equity with no payments, but interest compounds, reducing what is left for the homeowner or their estate. This is a conversation for a licensed broker.
FCAC’s own caution is direct: equity in the home falls as interest accumulates, reducing what is left for an estate.
| What it offers | What it costs |
|---|---|
| Cash without selling | Interest compounds the whole time |
| No regular payments | Equity falls as interest compounds |
| Money is not taxable | Set-up and closing costs apply |
| You stay in your home | Less is left for your estate |
The citable fact: A reverse mortgage trades tax-free cash now for compounding interest that reduces the equity left for the homeowner or their estate.
Reverse mortgage versus a HELOC in retirement: which suits whom?
A HELOC usually costs less in interest and preserves more equity, but needs interest payments and income qualifying. A reverse mortgage needs no payments and no income qualifying beyond age and equity, but interest usually runs higher. A homeowner comfortable with payments often suits a HELOC better.
A standalone HELOC can reach 65% of home value, or 80% combined with an existing mortgage, while a reverse mortgage caps out at 55%. See our equity take-out guides for Ontario and Alberta.
| Feature | Reverse mortgage | HELOC |
|---|---|---|
| Minimum age | Usually 55+ | No specific age |
| Maximum LTV | Up to 55% | Up to 80% combined |
| Payments | Not required | Required |
| Qualifying | Age and equity | Income and credit |
| Interest cost | Usually higher | Usually lower |
The citable fact: A HELOC generally preserves more equity and costs less, while a reverse mortgage requires no payments at the cost of higher interest.
What happens to a reverse mortgage when you die?
When the last borrower dies, the loan becomes due, and the estate, usually through the executor, must repay the full balance plus accumulated interest, typically from the sale of the home. Heirs cannot simply take over or assume the reverse mortgage; the debt must be settled first.
The home is usually sold, the balance is paid out of the proceeds, and whatever remains goes to the estate. For the broader process, see our guides on inherited property with a mortgage in Ontario and in Alberta.
The citable fact: A reverse mortgage becomes due when the last borrower dies, and the estate, not the heirs by assumption, must repay the full balance and accumulated interest, usually from the sale of the home.
Can you get a reverse mortgage if you still have a mortgage?
Yes, a reverse mortgage can pay out an existing mortgage, with the lender paid from the proceeds before the homeowner receives the rest. Because the maximum is 55% of the home’s current value, enough equity must exist above the existing balance for anything to be left over.
Show the math: room left after an existing mortgage
This is an illustrative example only; your own numbers depend on your home’s actual value and mortgage balance. Confirm the specifics with a broker before treating any figure here as a quote.
The citable fact: A reverse mortgage can pay off an existing mortgage first, but because total borrowing is capped at 55% of the home’s current value, enough equity must exist above the existing balance for cash to be left over.
Does a reverse mortgage affect OAS or GIS?
The money from a reverse mortgage is not taxable income, which is the one confirmed fact here. Whether that also excludes it from the OAS clawback or the GIS income test has not been confirmed. Confirm directly with Service Canada before assuming how it affects your benefits.
Reverse mortgage proceeds are loan proceeds, not income, which is a meaningfully different starting point from an RRIF withdrawal that does count as taxable income. The precise OAS and GIS interaction was not part of the FCAC source this page relies on.
Whether money drawn from a reverse mortgage affects the OAS recovery tax or the Guaranteed Income Supplement is a tax and benefits question rather than a lending one. Put it to your accountant, or to Service Canada, before you draw.
The citable fact: Reverse mortgage proceeds are not taxable income, though the effect on the Old Age Security clawback or Guaranteed Income Supplement test is not confirmed and should be checked with Service Canada.
What happens if you move into long-term care?
Moving into long-term care permanently generally counts as moving out, which is one of the events that triggers repayment. The loan, plus accumulated interest, becomes due, usually repaid from the sale of the home. Confirm the exact wording your lender uses for “moving out” before a care decision is finalized.
FCAC lists four triggers for repayment: sale, moving out, the death of the last borrower, or default, and a permanent move into care fits the “moving out” trigger. For more on living with a mortgage over time, see our guide.
The citable fact: A permanent move into long-term care generally triggers repayment of a reverse mortgage under the “moving out” condition, so the home is typically sold to repay the loan and accumulated interest.
Can you get a reverse mortgage on a cottage or vacation property?
Not confirmed here. FCAC’s guidance describes reverse mortgages in terms of a borrower’s home generally, without addressing a cottage or other recreational property specifically. Ask a lender or broker directly rather than assume either way.
A seasonal property without year-round access commonly faces tighter rules across mortgage products generally, but that has not been confirmed for a reverse mortgage specifically.
A reverse mortgage works only on your principal residence. It is not available on a cottage, a vacation property or a second home, so an owner looking to release equity from a recreational property needs a different product. Pekoe places reverse mortgages through several lenders rather than one, which matters because it means you are not defaulted into a single provider terms.
The citable fact: Reverse mortgage eligibility for a cottage or vacation property is not addressed in the confirmed guidance this page relies on, and needs lender confirmation.
What else should you check before considering a reverse mortgage?
A reverse mortgage is one option inside a wider set of choices for accessing equity or planning around an existing mortgage.
- What does the full mortgage journey look like, start to finish?
- How do you calculate what a mortgage payment actually costs?
The full set lives on the Ask a Broker hub.
Frequently asked questions
What is the minimum age to qualify for a reverse mortgage in Canada?
FCAC describes the minimum as usually 55 or older, though some lenders could set it differently. Confirm the minimum with your lender.
How much money can I get from a reverse mortgage?
You can typically borrow up to 55% of your home’s value, depending on age, property, and lender assessment.
Do I have to make payments on a reverse mortgage?
No regular payments are required, though interest adds to the balance until the loan is repaid, typically from the sale of the home.
Can my heirs take over my reverse mortgage after I die, or do they have to repay it?
The loan becomes due when the last borrower dies, and the estate must repay the balance plus interest. Heirs cannot simply assume the mortgage.
Does a reverse mortgage affect my Old Age Security or Guaranteed Income Supplement?
The money borrowed is not taxable, but its effect on the OAS clawback or GIS test is not confirmed. Check with Service Canada.
Can I get a reverse mortgage on a cottage or seasonal property?
This has not been confirmed. FCAC’s guidance covers a borrower’s home generally, and lenders set their own rules for seasonal properties.
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