Reverse Mortgage in Canada: How It Works, Costs and When It Makes Sense for Care

A reverse mortgage in Canada lets homeowners usually aged 55 or older borrow up to 55% of their home's current value without making regular payments; the loan, plus interest, is repaid when the home is sold, the borrowers move out or the last borrower dies (Financial Consumer Agency of Canada, October 2026). The money is tax-free and doesn't affect OAS or GIS, but interest rates are usually higher than a regular mortgage or line of credit.

Maybe your parents are house-rich and cash-poor: the home is paid off and worth a lot, but their pensions don't stretch to the help they now need. They don't want to move, and you don't want them to feel pushed. A reverse mortgage is one way to turn the house into the care that keeps them in it. It's also an expensive way, so it deserves a clear-eyed look.

How does a reverse mortgage work in Canada?

You borrow against your home and keep living in it, owning it as before. You can take the money as a lump sum, in stages or as regular payments. Nothing is due each month: the interest is added to the balance, so what you owe grows over time.

The loan comes due when you sell, when you move out, when the last borrower dies, or if you default (for example, by not paying property tax or insurance). Each lender sets its own timing for repayment after a move or a death, so ask for it in writing.

How much can you borrow?

Usually up to 55% of the home's current value. The actual amount depends on:

• The ages of everyone on the title (older borrowers can usually get more).
• The home's type, condition, location and appraised value.
• The lender's own rules.

Lenders also set minimums. The Financial Consumer Agency of Canada notes typical minimums of about $25,000 for a partial lump sum and about $20,000 to start regular payments.

Who offers reverse mortgages?

Two federally regulated lenders offer them: HomeEquity Bank, whose product is the CHIP Reverse Mortgage, and Equitable Bank. Some provincially regulated lenders and mortgage brokers offer them too. Federal consumer protections may not apply to a provincially regulated lender, which is one more reason to compare.

Our take: Get quotes from both banks, in writing, with the rate, every fee and the repayment terms after a move to care. Then sit down with a fee-only planner who doesn't earn anything from the loan.

What does a reverse mortgage really cost?

The real cost is time. Because interest builds on interest, a loan held for many years can take a large share of the home's value, leaving less for the estate.

Is a reverse mortgage a good idea to pay for care?

It can be, in a narrow set of situations:

• Good fit: your parent wants to stay home, needs paid care for a defined stretch (often a few years), has most of their wealth in the house, and the family is comfortable with a smaller inheritance.
• Poor fit: a move to a retirement home is likely soon (the loan comes due when they move out), the home needs major repairs, or a sale and downsize would cover the cost more cheaply.

For a family paying privately for regular home care, a reverse mortgage can fund it without selling. But compare the total interest over the years you expect to need care with the alternatives below before deciding.

What are the alternatives?

What should you ask before signing?

1. What's the rate, is it fixed or variable, and what's the total cost if we hold it 5 or 10 years?
2. Every fee, and which are added to the loan.
3. What happens, and how long the family has, if my parent moves into a retirement home or long-term care.
4. How long the estate has to repay after a death. It may be shorter than the time needed to settle the estate.
5. Do we have to pay off an existing mortgage or line of credit first, and will this stop us getting a HELOC later?
6. Is independent legal advice required in our province? Get it anyway.

How do you talk to a parent about it?

Lead with what they want, which is usually to stay home. Frame the house as the thing that can pay for that, then lay out the options side by side, including selling. Involve siblings early, because a reverse mortgage changes the inheritance, and surprises after the fact break families apart.