[et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”0px||||false|false” da_disable_devices=”off|off|off” global_colors_info=”{}” custom_margin__hover_enabled=”off|desktop” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” width=”95%” max_width=”100%” custom_margin=”||-24px||false|false” custom_padding=”55px||||false|false” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][wahi_breadcrumb _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][wahi_breadcrumb-link title=”Real Estate 101″ _builder_version=”4.18.0″ _dynamic_attributes=”link_option_url” _module_preset=”default” link_option_url=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9saW5rX3VybF9wYWdlIiwic2V0dGluZ3MiOnsicG9zdF9pZCI6IjcyMiJ9fQ==@” global_colors_info=”{}”][\/wahi_breadcrumb-link][wahi_breadcrumb-link title=”Buy” _builder_version=”4.18.0″ _dynamic_attributes=”link_option_url” _module_preset=”default” link_option_url=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9saW5rX3VybF9wYWdlIiwic2V0dGluZ3MiOnsicG9zdF9pZCI6IjE2MzIifX0=@” global_colors_info=”{}”][\/wahi_breadcrumb-link][wahi_breadcrumb-link title=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF90aXRsZSIsInNldHRpbmdzIjp7ImJlZm9yZSI6IiIsImFmdGVyIjoiIn19@” _builder_version=”4.18.0″ _dynamic_attributes=”title” _module_preset=”default” module_text_color=”#686E6E” global_colors_info=”{}”][\/wahi_breadcrumb-link][\/wahi_breadcrumb][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _dynamic_attributes=”content” _module_preset=”default” header_font_size=”3.5rem” header_line_height=”4.5rem” header_font_size_tablet=”42px” header_font_size_phone=”3rem” header_font_size_last_edited=”on|phone” header_line_height_tablet=”4.5rem” header_line_height_phone=”3.2rem” header_line_height_last_edited=”on|desktop” global_colors_info=”{}”]@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF90aXRsZSIsInNldHRpbmdzIjp7ImJlZm9yZSI6IjxoMT4iLCJhZnRlciI6IjwvaDE+In19@[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”3px||3px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][wahi_socialsharing _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][\/wahi_socialsharing][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.27.4″ _module_preset=”default” text_font_size=”24px” text_line_height=”1.5em” custom_margin=”||12px|||” global_colors_info=”{}”]<\/p>\n
A reverse mortgage can help Canadian homeowners aged 55 and older access their home equity without selling their property or making regular mortgage payments. But there are costs and trade-offs to consider. Here\u2019s how reverse mortgages work, who qualifies, and what to know before deciding if one is right for you.<\/span><\/p>\n <\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.27.4″ _module_preset=”default” text_font_size=”1.13rem” text_line_height=”1.18rem” custom_margin=”||7px|||” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n By Emma Caplan-Fisher<\/a> | 7 minute read<\/p>\n [\/et_pb_text][et_pb_post_title title=”off” author=”off” date_format=”M j” categories=”off” comments=”off” featured_image=”off” _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_post_title][et_pb_image src=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9mZWF0dXJlZF9pbWFnZSIsInNldHRpbmdzIjp7fX0=@” align=”center” force_fullwidth=”on” _builder_version=”4.18.0″ _dynamic_attributes=”src” _module_preset=”default” custom_padding=”40px|||||” border_radii=”on|32px|32px|32px|32px” global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n For homeowners who are asset-rich but <\/span>cash-poor in retirement<\/span><\/a>, a reverse mortgage can look like an appealing way to unlock money without giving up the house. A reverse mortgage in Canada lets eligible owners borrow against a portion of their home equity while continuing to live in the property, with no requirement to sell.<\/span><\/p>\n \u00a0<\/span><\/p>\n That flexibility comes with real trade-offs. Interest accumulates on the loan balance for as long as it’s outstanding, and the costs and long-term impact on your estate can be significant. Before deciding whether a reverse mortgage fits your financial picture, it helps to understand exactly how the product works, what it costs, who it’s best for and how it compares with other ways to access home equity.<\/span><\/p>\n –<\/span><\/p>\n A reverse mortgage is a loan secured against the value of your home, typically available to Canadian homeowners aged 55 and older, the <\/span>Financial Consumer Agency of Canada<\/span><\/a> (FCAC) confirms.<\/span><\/p>\n \u00a0<\/span><\/p>\n Instead of making mortgage payments each month, the homeowner receives money from the lender, drawn against a portion of the equity built up in the property.<\/span><\/p>\n \u00a0<\/span><\/p>\n Regular principal and interest payments generally aren’t required while the borrower remains in the home, subject to the terms of the loan agreement. In effect, a reverse mortgage turns a slice of home equity into accessible funds without forcing a sale, which is why it’s sometimes marketed by lenders as “equity release,” as the FCAC notes.<\/span><\/p>\n <\/p>\n –\u00a0<\/span><\/p>\n The amount you can access through a reverse mortgage depends on several factors, including your age and your home’s appraised value and its location. Funds may be provided as a lump sum, a partial lump sum with the remainder available over time or in regular payments, depending on what your lender offers.<\/span><\/p>\n \u00a0<\/span><\/p>\n Unlike a conventional mortgage, you aren’t repaying principal and interest as you go. Instead, your lender adds interest costs to the loan balance, which means the total amount owed increases over time. The longer the loan is outstanding, the more interest compounds against it.<\/span><\/p>\n \u00a0<\/span><\/p>\n The loan generally becomes due when the home is sold, the borrower moves out permanently, the last borrower on the loan dies or other repayment conditions in the agreement are triggered, <\/span>such as default<\/span><\/a>.<\/span><\/p>\n \u00a0<\/span><\/p>\n Running the numbers through a <\/span>mortgage and financial calculator<\/span><\/a> can help you visualize how a growing balance compares with the fixed payments of a traditional mortgage.<\/span><\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” background_color=”#edf7f3″ da_disable_devices=”off|off|off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” header_2_text_align=”center” header_2_text_color=”#38505b” header_2_font_size=”2.63rem” header_2_line_height=”3.75rem” max_width=”800px” module_alignment=”center” header_2_font_size_tablet=”32px” header_2_font_size_phone=”27px” header_2_font_size_last_edited=”on|phone” header_2_line_height_tablet=”3.75rem” header_2_line_height_phone=”32px” header_2_line_height_last_edited=”on|phone” global_colors_info=”{}”]<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” da_disable_devices=”off|off|off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n Eligibility rules vary somewhat by lender, but a few requirements are consistent across the market. Applicants must generally be 55 or older, and the home must usually be the owner’s principal residence, meaning they live there for at least six months of the year, per the FCAC.<\/span><\/p>\n \u00a0<\/span><\/p>\n Property type, condition, appraised value and location can all affect eligibility and the amount a lender is willing to offer. If there’s an existing mortgage or other secured debt registered against the property, like a home equity line of credit (HELOC), that debt typically needs to be paid off using the reverse mortgage proceeds before you can access the remainder.<\/span><\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n Home value matters, but don’t assume you can automatically borrow against the full worth of your property. Under a typical reverse mortgage, you may be able to access up to 55 per cent of your home’s appraised value, according to the FCAC. That maximum is influenced by:<\/span><\/p>\n Because location plays such a large role in appraised value, it’s worth tracking local <\/span>housing market reports<\/span><\/a> before applying, since a shift in your neighbourhood’s prices can move the borrowing ceiling up or down.<\/span><\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n <\/p>\n Not making regular payments doesn’t mean a reverse mortgage is free. Costs are impacted by the interest rate itself \u2014 generally higher than the rate on a conventional mortgage or HELOC \u2014 along with home appraisal fees, legal fees and setup or administrative fees, according to the FCAC. Prepayment penalties may also apply if the loan is paid off before it’s due.<\/span><\/p>\n <\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n Because interest is added to the balance rather than paid off monthly, the debt grows through <\/span>accrued interest<\/span><\/a> \u2014 essentially, interest charged on interest that has already accumulated.<\/span><\/p>\n \u00a0<\/span><\/p>\n The FCAC notes that how you choose to receive the money also affects the total cost: taking a lump sum for the full amount means paying interest on the entire balance right away, even on the portion you haven’t spent yet, while receiving funds in regular payments or partial lump sums can reduce how much interest builds up early on.<\/span><\/p>\n <\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n Weighing the upside against the long-term cost is central to deciding whether this product makes sense. The FCAC notes some positive and negative reverse mortgage considerations:\u00a0 Pros<\/b> Cons<\/b><\/p>\n Because home values tend to shift with local conditions, it’s worth checking a resource like Wahi’s <\/span>House Price Index<\/span><\/a> to see how appreciation (or depreciation) in your area might offset some of that erosion in equity over time.<\/span><\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n <\/p>\n A home equity line of credit is another common way to borrow against a property, like a reverse mortgage, but the two products work quite differently. A HELOC generally allows homeowners to borrow up to <\/span>65 per cent <\/span><\/a>of their home’s appraised value, compared with roughly <\/span>55 per cent<\/span><\/a> for a reverse mortgage, according to the FCAC.<\/span><\/p>\n \u00a0<\/span><\/p>\n It also notes a HELOC typically requires regular payments, with some lenders allowing interest-only as the minimum. Qualification depends on having sufficient home equity \u2014 a minimum of 35 per cent for a standalone HELOC or 20 per cent for one combined with a mortgage \u2014 and passing a stress test to prove you can afford payments at a qualifying rate.<\/span><\/p>\n \u00a0<\/span><\/p>\n Income and credit history could impact your HELOC eligibility, too.\u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n Reverse mortgages, by contrast, are designed specifically for homeowners 55 and older and don’t require regular payments. Fees, interest rates and total borrowing limits differ between the two as well, so the right choice comes down to whether you can comfortably manage ongoing payments or would rather avoid them altogether.<\/span><\/p>\n <\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n <\/p>\n Taking out a reverse mortgage doesn’t mean giving up ownership. Homeowners remain on title and retain ownership of the property throughout the life of the loan, according to the FCAC. What changes is the balance owed against it.<\/span><\/p>\n \u00a0<\/span><\/p>\n As interest accumulates, the reverse mortgage balance grows, which reduces the equity that remains. How much equity is ultimately left depends partly on how home prices move in the meantime \u2014 tools like Wahi’s <\/span>Market Pulse reports <\/span><\/a>can help you track those shifts \u2014 and partly on how long the loan stays outstanding.<\/span><\/p>\n \u00a0<\/span><\/p>\n The longer the balance compounds, the less equity is likely to be available when the home is eventually sold or passed on to an estate.<\/span><\/p>\n <\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n A reverse mortgage is one route to accessing home equity, but the FCAC recommends comparing options before committing to one.<\/span><\/p>\n \u00a0<\/span><\/p>\n Some alternatives include:<\/p>\n <\/span><\/p>\n Each option carries its own costs and trade-offs, so it’s worth exploring more than one before settling on the route that best matches your circumstances.<\/span><\/p>\n <\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n Every part of this decision \u2014 how much you can borrow, what a reverse mortgage might cost and how alternatives stack up \u2014 starts with an accurate sense of what your home is worth.\u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n Home value affects the equity available to you, whether you’re considering a reverse mortgage, a HELOC, downsizing or refinancing. And your home’s value is directly impacted by local market conditions.<\/span><\/p>\nWhat Is a Reverse Mortgage?<\/h2>\n
How Does a Reverse Mortgage Work in Canada?<\/h2>\n
\u201cWeighing the upside against the long-term cost is central to deciding whether this product makes sense.\u201d<\/b><\/h2>\n
Who Qualifies for a Reverse Mortgage?<\/strong><\/h2>\n
How Much Can You Borrow?<\/strong><\/h2>\n
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What Does a Reverse Mortgage Cost?<\/strong><\/h2>\n
Interest Compounds Over the Life of the Loan
<\/strong><\/h2>\nPros and Cons of a Reverse Mortgage
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<\/span><\/li>\n<\/ul>\nReverse Mortgage vs. HELOC
<\/strong><\/h2>\nWhat Happens to Your Home Equity?<\/strong><\/h2>\n
Alternatives to a Reverse Mortgage
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Why Knowing Your Home’s Value Matters
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