Reverse Mortgages in Canada: A Plain-Language Guide for Homeowners

A reverse mortgage in Canada is a loan secured by your home that you generally do not repay in monthly instalments. The interest gets added to what you owe, and the balance comes due when you sell, move out for good, or pass away. It solves a real problem — turning a house you own into cash you can spend without moving out. It is also one of the more expensive ways to borrow, so it deserves a hard look before you sign anything.

Worth saying up front: LoanGoose is a loan matching and comparison service, not a lender. We do not make loans, set rates, or decide who qualifies. Approval always depends on the lender's own criteria. What we can do is explain how the product works and what to ask.

What a reverse mortgage actually is

You keep the title to your home. You keep living in it. The lender registers a mortgage against the property and advances money to you, and you are not required to make payments along the way. That is the whole idea, and it is genuinely useful for a homeowner who is house-rich and cash-poor.

You can usually take the money in a few different ways: a single lump sum, a series of scheduled advances, or a credit line you draw on when you need it. A credit line is often the cheaper structure, because you only accrue interest on the portion you have actually drawn. Ask each lender which structures it offers and how the rate differs between them.

Most reverse mortgage lenders require the property to be your principal residence, and each sets its own minimum age for borrowers. Minimum ages vary, so ask the lender directly rather than assuming you qualify at any particular point in life.

You stay responsible for the house. Property taxes, home insurance, condo fees, and basic upkeep remain your job. Falling behind on those can put you in default even though you have not missed a single loan payment, because the lender's security is the property itself.

How the balance grows over time

With an ordinary mortgage, you pay as you go and the balance falls. With a reverse mortgage, you do not pay as you go, so interest is added to the principal and the next period's interest is calculated on the larger number. That is compounding, and it is the single most important thing to understand about this product.

Over a long stay in the home, a modest starting advance can grow into a substantial debt. That is arithmetic, not fear marketing. Ask the lender for a written illustration showing the projected balance at several future dates, and look at the longest timeline you can imagine living there.

Whether that illustration holds depends on rates. If you choose a variable rate, your balance is tied to the rate environment, and the Bank of Canada — rates page shows how the policy rate has moved over time. Fixed-rate mortgages in Canada are compounded semi-annually by law, so ask how a reverse mortgage's interest is compounded and how often it is added to the balance — the frequency changes the outcome.

Reverse mortgage versus your other options

Before committing, put the reverse mortgage next to the alternatives. The right answer depends on your income, your health, how long you plan to stay, and what you want to leave behind.

The rules that apply

There is an outer legal limit on the cost of borrowing. The Criminal Code sets a criminal rate of interest of 35% per year, calculated by a defined method that aggregates interest and certain charges, in force since 2025-01-01 (Criminal Code s. 347 — criminal rate of interest). That is a ceiling, not a benchmark. Plenty of legal products sit far below it and are still expensive.

Who supervises your lender depends on how that lender is regulated. Complaints about federally regulated financial institutions are handled by the Financial Consumer Agency of Canada. Provinces license and supervise most other lenders, and each province has a consumer protection office — the FCAC — provincial and territorial regulators page lists them by province.

If you are already in serious debt trouble, a reverse mortgage is usually the wrong first call. Only a licensed insolvency trustee can administer a consumer proposal or bankruptcy, and trustees are regulated by the Office of the Superintendent of Bankruptcy Canada. Talk to a trustee before borrowing against your home to clear other debts, because in that situation the order you do things in matters a great deal.

Before you shop, pull your own file. Canada has two national credit reporting bureaus — Equifax Canada and TransUnion Canada — and a free copy of your credit report is available from each, as explained on FCAC — credit reports and scores. Knowing what is on your report beats guessing.

Questions to ask before you sign

Take these to every lender you speak with, and get the answers in writing.

• What is the interest rate, is it fixed or variable, and how often is interest added to the balance?
• What is your minimum age for borrowers, and does everyone on title need to qualify?
• What happens if my spouse or partner is not a borrower on the loan?
• Can I repay part or all of the loan early, and are there charges for doing so?
• What exactly triggers default, and how much notice would I receive?
• What happens if the balance ends up larger than the home's sale price?
• What are the upfront costs — appraisal, legal, administration — and who pays them?
• What happens if I move into a care home or live with family for a period of time?

When a reverse mortgage is the wrong tool

It is usually a poor fit if you expect to move within a few years, because upfront costs spread over a short stay hurt. It can be a poor fit if preserving an inheritance matters more to you than spending the equity. It is often the wrong answer if you can qualify for a home equity line of credit or a refinance with lower ongoing costs. And it is a bad idea if someone else is pushing you into it.

For a wider, plain-language grounding in borrowing, debt, and consumer rights, the Financial Consumer Agency of Canada is a sensible place to start. For a decision this large, with your home as the collateral, a conversation with an independent fee-for-service financial planner or a licensed mortgage professional is worth the money.

LoanGoose is a loan matching and comparison service, not a lender. The lowest rates are only available to the most qualified applicants.