Rob McLister: Here’s everything you’ve ever wanted to know about reverse mortgages, including the best rates, updated daily
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Canada’s mortgage market is changing all the time, but we keep track of the best rates. Bookmark this page to find the best reverse mortgage rates, updated daily, based on data from MortgageLogic.news. Postmedia and Imaginative.Online Inc., parent of MortgageLogic.news, are compensated by certain mortgage providers when you click on their links in the chart below.
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When you’re an equity-rich, 55-year-old-plus homeowner and you need cash, and your only other liquidity plan involves winning the lottery, a reverse mortgage can feel like divine intervention.
Reverse mortgages let you convert home equity into cold, hard, tax-free cash. They require no monthly payments whatsoever (interest owed is added to the value of the loan) and as long as you keep your home maintained and your property taxes and insurance paid, lenders won’t ask you to pack your bags or pay them back early.
And here’s the kicker: if home prices plunge, lenders guarantee you’ll never owe more than your home is worth at the time it’s sold.
Once the black sheep of personal finance, reverse mortgages are now lower cost than in the old days, and far more mainstream. In fact, a 2023 Deloitte study found that 17 per cent of soon-to-retire homeowners were ready to tap their home equity to bridge a savings shortfall.
Reverse mortgage proceeds can be used for virtually anything. You can:
Naturally, reverse mortgages aren’t the only fish in the home loan sea. Here’s how the main options compare:
Note that some banks and brokers offer cash rebates to offset some of these fees. At a minimum, always ask for an appraisal rebate, as reverse mortgages have healthy profit margins and whoever is selling you one can spare the change.
Speaking of reverse mortgage sellers, there are three main providers of reverse mortgages in Canada: HomeEquity Bank, Equitable Bank and Bloom Finance. All three are sound, reputable companies, but each has its quirks. An experienced mortgage broker can help you compare them.
For now, read on to see:
Older Canadians can’t rely as much on their ability to generate income. That sometimes leads to cash flow issues that make even Tim Hortons coffee seem expensive.
For many, reverse mortgages are the last fiscally viable option to live a comfortable life, but to qualify, there are three key requirements:
Depending on your age, property and location, you can get anywhere from 15 per cent to 59 per cent of your home value.
If there’s another mortgage already parked on your title, reverse lenders will politely decline or make you pay it off. If you have a mortgage on your home for 60 per cent of its value, for example, a reverse mortgage is out of the question.
On the other hand, if you have an existing mortgage and qualify for a big enough reverse mortgage, you can use the new reverse mortgage to pay off the other loan, thus eliminating its payments.
Also, the home must be where you actually live — not a rental or Airbnb that you check on once a month.
If the condition of your home would scare off an appraiser or resale buyer, a reverse mortgage company won’t want it either.
The property must be in good repair with a minimum value of $200,000 to $300,000.
Location matters, and some lenders have location restrictions. For example:
And yes, if your town’s claim to fame is a blinking yellow light, you might not qualify. Some companies want a minimum population (e.g., 10,000 or 100,000-plus) before they’ll lend.
You may not have mortgage payments, but you still need to pay your property taxes, insure the place and keep it from resembling a fixer-upper on a reality show. The lender will make sure you can afford to do that.
Failing to pay property taxes, insurance, or maintain the home can lead to default.
Unless promptly cured, the lender can swoop in to foreclose faster than a hawk on a field mouse.
The best strategy is to stash enough cash away for retirement so that your home doesn’t have to double as an ATM.
Yet, there are four specific times when a reverse mortgage is especially ill-advised:
A HELOC is essentially a giant credit card tied to your house. It lets you borrow as you need to, as opposed to taking a big lump-sum at the beginning that you may not need.
HELOCs are usually at least one percentage point cheaper rate-wise and offer the lowest possible interest-only payments. Albeit, HELOCs only come with floating rates, whereas reverse mortgages and regular mortgages offer fixed-rate options.
Manulife’s One HELOC is one of the best reverse mortgage substitutes because, unlike most HELOCs, it also doubles as a bank account. That means depositing income into the HELOC can effectively satisfy the monthly interest-only payments.
Manulife also has more flexible qualifying options than some HELOC providers.
Pro tip: Cap your HELOC limit at 75–80 per cent of what you’d qualify for with a reverse mortgage.That way, if all else fails, you can pay off the HELOC with a reverse mortgage if needed.
One catch with HELOCs: lenders can yank the credit line if they get cold feet or your finances nosedive. I’ve never heard of Manulife calling in its line of credit if the borrower is paying as agreed, but anything’s theoretically possible. Reverse mortgages don’t come with this risk.
While we’re on the topic of HELOCs, we should mention there’s one reverse mortgage lender that offers a HELOC-like option. The company is Bloom Finance.
Bloom’s Home Equity Prepaid Mastercard lets you draw funds when needed, with no readvance fees — unlike most reverse mortgage companies. Over a decade, that flexibility could save you thousands, but it depends on how you borrow and what the rates are at the time.
The upfront costs of a reverse mortgage (e.g., closing costs, appraisal fees and interest) may outweigh the benefits, making other financial options more cost effective.
You may also face stiff prepayment penalties if you bail from a reverse mortgage before three to five years.
Skip basic upkeep, tax or insurance payments and it’s like sending your lender a formal invitation to call in your loan.
Compound interest doesn’t just take a bite — it goes full buffet on your home equity.
Depending on rates, appreciation and how much you borrow, the loan could vacuum up every dollar of equity within 20 to 25 years. And keep in mind, the average 65-year-old still lives for at least 20 more years — plenty of time for interest to turn a nest egg into an empty shell.
You can see the latest reverse mortgage rates updated daily on this page. They’re usually at least one to two percentage points above regular mortgage rates for a similar term. That’s the cost of easy qualification and the luxury of no payments.
Always consult a broker who specializes in reverse mortgages and has worked with all three major providers. That way, you’re comparing more than just brochures — which matters since the lenders’ rates, fees and fine print vary.
Pro tip: Brokers get paid a commission. Ask the broker to explain how their commission differs among lenders and how it might affect their recommendation. That way you know if there might be conflicts of interest — and maybe even haggle your way to a small cash rebate.
Plan on at least the following:
Reverse mortgage lenders often run promos that can reduce fees substantially. Make sure you ask the lender or broker what is currently on offer.
With most mortgage lenders, the loan salesperson can “buy down” (reduce) the interest rate by sacrificing some of their commission.
We’re unaware of any reverse mortgage lender that allows this.
You can take money out via:
Instalments rack up less interest than lump-sum withdrawals.
Unscheduled advances generally entail a $50 fee, but not when using Bloom’s Mastercard.
Reverse mortgages often close in as few as three to four weeks. That assumes your independent counsel deems a reverse mortgage suitable, and there are no snags with your property valuation.
If you have an open reverse mortgage, there is no penalty, but the rate is higher.
For closed versions, there may be a prepayment penalty ranging from three-months’ interest to five per cent of the approved loan amount, depending on how early the breakup happens. If you pay off the loan at the end of the term in five years, there is no penalty.
Some lenders show mercy if you’re heading to long-term care — splitting the penalty so your exit doesn’t sting quite as much. And if you pass away with the mortgage still in place, there’s no penalty — though I wouldn’t call that a “loophole” worth planning for.
Nope. Reverse mortgage proceeds don’t count as income, so your income-tested government benefits — such as Old Age Security (OAS) or the Guaranteed Income Supplement (GIS) — are unaffected. In other words, no OAS or GIS clawbacks.
Reverse mortgage loans must be paid off before assets are divvied up by heirs. And the steeper the interest rate, the quicker that equity gets torched — leaving less behind for the next generation.
But hey, it’s the homeowners’ own hard-earned money, not a trust-fund starter kit, right kids?
Downsizing could be a better call if your goal is to leave the kids more than just property tax bills and your stamp collection. But keep in mind, selling and moving isn’t free. Get ready for:
When the last borrower passes, the estate has to settle the loan before anyone inherits so much as a throw pillow.
Somewhere around 71, say lenders.
In general, you should always shop around and it never hurts to try and play one lender against another. Equitable Bank has even started throwing down the gauntlet by advertising: “We’ll beat any reverse mortgage rate posted in Canada.”
Generally, yes.
Yes, if you qualify.
That depends on the interest rate and home appreciation, among other things.
Say you borrow $200,000 on a $500,000 home, the home appreciates at two per cent annually, and your interest rate averages six per cent.
According to HomeEquity Bank’s calculator, you’d still have $90,567 left after 20 years — assuming nothing goes sideways with rates, valuations or reality.
In practice, the average reverse mortgage lasts only seven to 12 years.
As an industry average, it’s somewhere around 50 per cent — kind of like splitting a pie with a very hungry banker.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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