What is a reverse mortgage?

A reverse mortgage is designed for older Canadian homeowners and allows eligible borrowers to access a portion of the equity in their home. Eligibility requirements, including minimum age, vary by lender and product.

Unlike a traditional mortgage, you generally aren't required to make regular principal and interest payments while you remain in the home and meet the terms of the mortgage.

Instead, interest is added to the mortgage balance over time.

Do I still own my home?

Yes.

A reverse mortgage doesn't mean giving the lender ownership of your home. You remain the homeowner and continue to benefit if the property's value increases.

You're also still responsible for the obligations that come with owning the property, such as property taxes, home insurance and maintaining the home.

How much money can I access?

That depends on several factors.

The lender may consider the age of the homeowners, the value and location of the property, the type of home and the amount of existing debt secured against it.

You don't necessarily have to take all of the available money at once. Depending on the product, there may be different ways to receive the funds.

What can the money be used for?

There can be a lot of flexibility.

Some homeowners use a reverse mortgage to supplement retirement income, pay off an existing mortgage or other debts, renovate their home, help family members financially or create additional monthly cash flow.

There generally isn't a requirement to use the funds for one particular purpose.

If there are no regular payments, what happens to the interest?

This is one of the most important things to understand.

Interest continues to accrue and is added to the mortgage balance. That means the amount owing generally increases over time rather than decreases as it would with a traditional mortgage where you're making regular payments.

Because of that, a reverse mortgage can reduce the amount of home equity that remains later.

That's not automatically good or bad, but it is something you should understand before deciding.

When does a reverse mortgage have to be repaid?

Generally, repayment is triggered when the home is sold, the homeowners permanently move out, or the last borrower dies, subject to the specific terms of the mortgage.

The exact conditions matter, so this is an area where reading and understanding the lender's agreement is particularly important.

Is a reverse mortgage better than a HELOC?

Neither is automatically better.

A home equity line of credit can have a lower borrowing cost, but usually requires regular payments and qualification based on income and other lending criteria.

A reverse mortgage works differently and may be useful when preserving monthly cash flow is particularly important.

For some homeowners, a HELOC is the better solution. For others, a reverse mortgage may fit better.

And sometimes neither is the right answer.

What are the downsides?

Reverse mortgages generally have higher borrowing costs than conventional mortgages, and because interest is added to the balance, the amount owing can grow substantially over a long period.

There may also be setup, appraisal, legal or other costs.

And because you're using your home equity today, there may be less equity available later for you or your estate.

Those trade-offs deserve a real conversation - not just a sales pitch.

A reverse mortgage is a tool, not automatically a solution.

For the right homeowner, it can provide valuable flexibility and allow them to remain in their home while accessing equity they've built over many years.

But it should be compared with the other options available before making a decision.

Wondering if a reverse mortgage makes sense for you?

Let’s look at what you want to accomplish, compare the available options and make sure you understand both the benefits and the costs.