A Traditional reverse mortgage is just what it sounds like – a loan in which a homeowner can get up to 55% of the current value of their primary residence without having to sell the home or refinance the property. In Canada, with most Reverse Mortgage Institutions, you have to be at least 55 years old to take out a reverse mortgage as a tool to gain access to the equity that you’ve amassed in your home. There are Non-Traditional Private Lender Reverse Mortgage Options available in marketable areas in BC, Alberta, and Ontario where you are able to get up to 50% of the property value regardless of age and if the property is your primary residence. They key difference is that with this option, the term is currently capped at 48 months. This is great alternative for seniors and business owner, or owners in transition.
The Traditional reverse mortgages British Columbia and other provinces allow can yield peace of mind and financial flexibility, especially for retired homeowners who live on fixed incomes. It can be a real game-changer for some senior citizens’ financial futures. However, before you sign the paperwork, it’s important to understand just what the reverse mortgages Alberta and other provinces allow involve.
Here’s how it works. Let’s say you own your home free and clear and have for the last decade. Your income consists of a set pension amount that occasionally increases but never seems to catch up with the rising costs of inflation. You don’t have any interest in “downsizing” – selling your home and moving into a smaller place, such as an apartment or a senior living community. You could use an upgrade to your income, but a home equity loan could be tricky because your retirement income doesn’t have room for a new loan payment.
A reverse mortgage basically pays you your equity either in a lump sum or in a monthly payment. Once the house is sold, the proceeds go to paying back the mortgage. As long as you stay in your home as a primary residence (meaning you live there at least six months out of the year) and do not sell it, you don’t have to pay the money back. So, it’s one way to add to your retirement funds without having to make major changes to your lifestyle.
Who Should Consider a Reverse Mortgage in 2025?
The reverse mortgages Ontario and other provinces allow have a few requirements:
- You have to be at least 55 years old, and so does anyone else listed on the home’s title.
- You have to own the home that you would borrow against, and it has to be your primary residence.
- Your home has to be worth a minimum of $200,000 (although one of the three Traditional reverse mortgage lenders in Canada, Homequity Bank, sometimes requires a minimum of $250,000).
At this writing, the Three primary providers of reverse mortgages are Bloom, Equitable Bank and Homequity Bank. They are Schedule 1 banks in Canada. HomeEquity Bank offers reverse mortgages throughout every Canadian province but does not offer them in the three territories. Equitable Bank only have four provinces where they offer reverse mortgages – BC, Alberta, Quebec, and Ontario.
Just like with traditional mortgages, reverse mortgages have various forms. Do you want an open or closed agreement? In an open agreement, if you come into other money, perhaps through an inheritance or an appreciation of other investments, you could pay off the loan early without penalty, while a closed agreement requires that you wait until you sell the house to pay it in this case. Do you want a fixed or variable interest rate? How do you want to get your money – all of it up front, or an initial lump sum with smaller withdrawal amounts that come later?
The most commonly used reverse mortgage in Canada is the CHIP Reverse Mortgage, initially called the Canadian Home Income Plan. It was HomeEquity Bank’s first product involving a reverse mortgage and now is just one of the many options for the reverse mortgages Ontario residents and Canadians elsewhere in the country have used.
HomeEquity Bank and Equitable Bank rely on a solely online presence, so your application process will be virtual. You’ll need to provide your age, address, appraised value and condition of your home as well as the names of everyone listed on the title. In some cases, you may be required to see legal advice about a reverse mortgage and show proof that you sought and received that advice.
The downside of the reverse mortgages British Columbia and other provinces have authorized is the comparatively high interest rate for the loan. Reverse mortgages don’t come with the same type of amortization schedule that traditional mortgages do, so interest can grow indefinitely and take away even more of the equity in your home.
To provide an example, as of February 4, 2025, Equitable Bank offered rates ranging from 6.59 per cent on a five-year fixed-rate loan to 7.94 per cent on a six-month fixed-rate loan. The HomeEquity Bank CHIP Reverse Mortgage was available from a fixed rate of 6.69 per cent to a variable rate of 7.86 per cent, both over five-year terms. Those rates are on top of fees; for Equitable Bank, the initial setup cost is $995 in addition to appraisal and legal fees. HomeEquity Bank charges $1,795 for administrative and closing costs for the CHIP products. Also, both banks charge early pre-payment fees.
In the final analysis, if you are a senior citizen with a home that is all or nearly paid off free and clear, but your pension income and interest from investments are not quite doing it as far as meeting your needs, setting up a reverse mortgage is one solution that could prove ideal. The fees and interest rates make it worth your while to look at all of your other options as well.
How Reverse Mortgages Are Helping Seniors Combat Inflation
Inflation has been a particularly difficult problem in the wake of the COVID-19 pandemic. Prices dropped significantly during that time period as corporations saw demand plummet in a number of sectors. Since the pandemic eased, though, corporations have increased their prices in order to recoup their losses, and even as the supply chain has resolved many of its issues, costs remain high. As of January 2025, the annual inflation rate in Canada crept up to 1.9 per cent; even though the government had issued a GST/HST “holiday” on such items as food, higher costs for energy burned through those savings.
The number 1.9 per cent might not sound like a lot. However, if you’re living on a fixed pension, you’ll likely find that the government doesn’t provide adjustments that keep up with inflation. You might have had a fairly rosy – if somewhat frugal – financial pathway forward when you retired, but as costs have increased, things have gotten progressively tighter.
In the meantime, you’re sitting on top of a huge pile of money, but it’s illiquid – the equity that you’ve built up in your house. A reverse mortgage gives you a lump sum that you can sock away against the tide of rising costs, or you can also take out a smaller sum up front and then take out more once a quarter, or once a year, or when you need it.
The Latest Government Policies Affecting Reverse Mortgages
Most of the new regulations affecting mortgages in Canada affect the traditional market more than the revers market. However, if you want one of the reverse mortgages Ontario and other provinces permit, you’ll need to go through one of the federally regulated financial institution, a provincially regulated institution or a mortgage broker. The consumer protections in place for these financial institutions depend on the entity regulating them. If you’re dealing with a lender in a territory, that entity could face significantly different regulations from what you would find in an Ottawa or Vancouver bank.
Federally regulated financial institutions offer safeguards that are required as part of the Financial Consumer Protection Framework in Canada. Entities regulated at the provincial or territorial level may offer different safeguards. If you do not fit the criteria with a Federally Regulated Lender, Amansad Financial can help you with alternative short-term private lender solution.
In Canada, you can use reverse mortgage funds for anything. If you have large debts to pay off, significant home repairs, healthcare expenses, or other regular bills, you can use the funds for those. You can go into default on a reverse mortgage, but it’s fairly rare. The most common ways to default on this type of loan are:
- Using your reverse mortgage funds for an illegal purpose
- Allowing your home to fall into such disrepair that its value decreases
- Making dishonest misrepresentations in your application
- Failing to follow conditions of the reverse mortgage contract
Do you think that a reverse mortgage might be right for you in 2025? Reach out to one of the 3 Traditional Reverse Mortgage Schedule 1 Lenders. The reverse mortgages BC and other provinces can offer could help make your retirement years more comfortable and give you the peace of mind you’ve worked for a lifetime to earn.
If you do not qualify for a Traditional Reverse Mortgage, Contact Amansad Financial. We can determine if you qualify for a Private Reverse (Appreciation) Mortgage Option or another Alternative such as a No-payment Mortgage.