Reverse Mortgage Overview for Canadian Homeowners 55+ 2026

What Is a Reverse Mortgage?

A reverse mortgage is a financial product available to Canadian homeowners aged 55 or older. It enables access to some portion of the home’s equity without requiring the borrower to make monthly payments. Unlike a traditional mortgage, the loan balance increases over time from compounded interest and fees. Repayment typically occurs when the homeowner sells the home, permanently moves out, or passes away.

Reverse mortgages are designed primarily to assist older Canadians who may have significant home equity but limited liquid income. They allow the homeowner to stay in their primary residence while obtaining funds that can be used for various purposes such as supplementing retirement income, covering home repairs, or managing unexpected expenses.

How Reverse Mortgages Work in Canada

Homeowners take out a reverse mortgage by borrowing against their home equity, often up to approximately 55% of the property’s appraised value. The exact amount depends on factors including the borrower’s age, the home’s value, and lending institution policies.

Funds from a reverse mortgage can be received in lump sums, regular monthly advances, or as a line of credit. Because no monthly payments are required, interest and fees accumulate and are added to the loan balance over time. The debt balance becomes payable when the homeowner sells the property, moves to a long-term care facility, or passes away.

If the loan balance exceeds the home’s value at sale, most reverse mortgages in Canada include a non-recourse feature. This means neither the homeowner nor their estate is responsible for paying the difference. The lender absorbs any shortfall.

Eligibility Criteria in Canada

Reverse mortgage lenders require that borrowers:

• Be at least 55 years old.
• Own the home and live in it as their primary residence (typically for at least six months per year).
• Have sufficient equity in the home.
• Meet minimum property standards and appraisal requirements.

Not all property types qualify. Most lenders accept single-family homes, some condominiums, and in some cases, townhouses. Properties with significant structural issues or those located in certain regions may be ineligible.

Tax and Government Benefits Considerations

The funds received from a reverse mortgage are considered loan proceeds, not income. Therefore, they are generally tax-free and do not affect government income-tested benefits such as Old Age Security (OAS) or the Guaranteed Income Supplement (GIS). This is an important consideration for retirees who want to access additional funds without reducing other benefits.

Typical Uses of Reverse Mortgage Funds

Reverse mortgage proceeds can be used for a variety of expenses, for example:

• Supplementing retirement income gaps
• Paying for home repairs or renovations
• Managing medical or personal care costs
• Funding debt consolidation
• Financing daily living expenses

The flexibility in fund disbursement allows borrowers to tailor their use of funds to their financial needs.

Typical Costs in Canada (2026)

When considering a reverse mortgage in Canada in 2026, typical costs may include:

• Basic option: Approximately $2,000 to $4,000 CAD in upfront fees and closing costs, suitable for straightforward property types.

• Standard option: Around $4,000 to $6,000 CAD, which may include appraisal fees, legal fees, and administrative charges.

• Premium option: $6,000 CAD or more, covering additional services such as priority processing, more flexible repayment terms, or specialized legal advice.

Interest rates on reverse mortgages can vary and are usually higher than conventional mortgage rates. The rate impacts the growth of the loan balance over time.

Alternatives to Reverse Mortgages

Several alternatives may be available to Canadian homeowners seeking to access home equity or improve cash flow:

Home Equity Line of Credit (HELOC)

A HELOC allows homeowners to borrow against their home equity with a revolving line of credit. Borrowers must qualify for monthly payment obligations based on income and credit. Unlike reverse mortgages, HELOC requires payments while the loan is outstanding.

Downsizing or Selling

Selling the home and buying a smaller property or moving to rental accommodation can release home equity but involves relocation and transaction costs.

Government Programs and Subsidies

Certain federal and provincial programs offer financial assistance for seniors, including property tax rebates, energy cost supports, or home modification grants.

Personal Loans or Retirement Savings

Using personal loans, RRSP withdrawals, or other savings may also provide liquidity, though these options have tax or repayment considerations.

Estate and Inheritance Considerations

A reverse mortgage affects the homeowner’s estate because the loan balance must be repaid upon the homeowner’s death or permanent move. The home may need to be sold to settle the debt. Non-recourse clauses protect the estate from owing more than the home’s sale value.

Heirs should be informed about any reverse mortgage as it impacts inheritance and estate planning.

Risks and Considerations

While reverse mortgages provide access to home equity without monthly payments, they also carry risks including:

• Accumulating debt balance reduces home equity over time.
• Potential for reduced inheritance value.
• Fees and interest can be higher compared to conventional loans.
• Changes in housing market value may affect loan-to-value ratios.
• Possible complications if the homeowner moves for extended periods.

Careful assessment of personal financial needs and long-term plans is recommended before pursuing a reverse mortgage.

Regulations and Consumer Protections in Canada

Reverse mortgages are regulated under federal and provincial laws. Lenders must provide clear disclosure of terms, fees, and conditions. The Canadian government has also outlined voluntary codes of conduct to ensure responsible lending and borrowing practices.

Prospective borrowers are encouraged to seek independent financial and legal advice to fully understand reverse mortgage implications.

Summary

Reverse mortgages remain a significant financial tool for Canadian homeowners aged 55 and over to access home equity without immediate repayment obligations. They may suit some retirees needing additional funds while maintaining their residence. However, these products entail costs and risks that should be weighed alongside other financial options available in Canada in 2026.