How reverse mortgages work
A reverse mortgage is structured as a loan secured against your home, but with no required monthly payments. You can take the funds as a lump sum, a series of advances, or a regular monthly income. Interest accrues on the outstanding balance and is added to the loan — the longer you have the reverse mortgage, the larger the balance grows.
You retain title to the home throughout — the bank doesn't own it, you do. The reverse mortgage simply registers a charge against title (like a regular mortgage) for the amount owed.
When the home is eventually sold (because you move, downsize, or pass away), the reverse mortgage is repaid from the sale proceeds. Whatever's left over goes to you or your estate. Critically, Canadian reverse mortgages have a "non-recourse" guarantee — even if the loan balance has grown larger than the home's value (rare but possible in declining markets), the lender can never come after your other assets or your estate.
Who qualifies
Two providers dominate the Canadian reverse mortgage market: HomeEquity Bank's CHIP and Equitable Bank's PATH. Both have similar criteria.
Age: all homeowners on title must be at least 55. Property: your primary residence in a major Canadian market (most cities qualify; rural and remote properties sometimes don't). Equity: you can typically borrow 25-55% of your home's appraised value, depending on age (older = higher percentage), location, property type, and current rates. Income: not required — that's the whole point. There are no income or credit qualifying criteria beyond the home value.
Because there's no income test, reverse mortgages are accessible to retirees on fixed pensions, those with limited credit history, and those who would never qualify for a traditional refinance.
Costs and rates
Reverse mortgage rates are typically 1-2% higher than conventional mortgage rates. As of mid-2026, reverse mortgage rates run roughly 6-7% (vs ~5% for conventional 5-year fixed). This is a meaningful spread, and it compounds because there are no payments reducing the balance.
Setup costs include an appraisal ($350-$500), legal fees ($1,500-$2,000), and a small administration fee. These come out of the proceeds, so there's no out-of-pocket cost at closing.
Compounding is the most important number to understand. A $200,000 reverse mortgage at 6.5% interest grows to about $275,000 in 5 years, $375,000 in 10 years, $515,000 in 15 years, and $700,000 in 20 years. If you live in your home for 20 more years, the loan balance can substantially erode the equity you'd otherwise pass to heirs.
When reverse mortgages make sense
Reverse mortgages work well for: retirees with substantial home equity but inadequate monthly income, those who want to age in place rather than downsize, those with no heirs (or whose heirs don't need or want the home), and those facing immediate cash needs (medical, family emergency, lifestyle) that traditional refinancing won't accommodate.
They especially fit borrowers with shorter horizons — someone in their late 70s or 80s borrowing $100,000 against a $700,000 home is unlikely to see compounding erode the inheritance materially before sale.
When reverse mortgages don't make sense
Reverse mortgages are usually not the right choice for: borrowers in their early-to-mid 60s with long expected horizons (compounding has more time to compound), borrowers whose primary financial concern is preserving inheritance for heirs, borrowers who would qualify for a conventional refinance or HELOC at much lower rates, and borrowers who plan to move in the next 2-3 years (the setup costs aren't worth it for short-term funds).
If you can qualify for a HELOC, that's almost always cheaper. If you can qualify for a refinance, that's usually cheaper too (though it requires monthly payments, which is the whole reason people consider reverse mortgages instead). The reverse mortgage is the right product when no other product works.
Alternatives to consider first
Before signing a reverse mortgage, it's worth exploring: downsizing (selling your current home and buying smaller, freeing up equity directly), HELOC (if you have any income, even pension-based, you may qualify), conventional refinance (lower rate, but requires monthly payments), renting out a portion of your home (basement suite, garden suite — taxable income but doesn't compound against your equity), or family equity arrangements (a child or family member buys a portion of the home and rents it back to you, formalized through a lawyer).
Each of these has trade-offs, but each is worth running the numbers on before defaulting to a reverse mortgage. The right answer depends on your specific situation — and a good broker or financial advisor can model the alternatives side by side.