What is a reverse mortgage?

A reverse mortgage is a loan secured against the value of your home that requires no monthly mortgage payments. Instead, the interest is added to the loan balance, causing the debt to grow significantly over time. It is repaid when you move, sell, or pass away.

Why does the debt grow so fast?

Because you make no payments, the lender adds interest to the balance, and later interest is charged on that added interest. The Financial Consumer Agency of Canada notes that reverse mortgage rates are usually higher than regular mortgage or HELOC rates, which speeds this up. The calculator compounds twice a year; check how your own contract compounds.

Can I owe more than my house is worth?

In the US, FHA-insured HECM reverse mortgages are non-recourse: the CFPB says heirs will not have to pay more than 95% of the appraised value, and mortgage insurance covers the rest. In Canada, FCAC guidance does not set a federal rule on this, so read your lender’s contract for any guarantee and its conditions. Either way, the equity left for heirs can fall to zero.

How much can I borrow with a Canadian reverse mortgage?

FCAC says you can usually borrow up to 55% of your home’s current value, and that reverse mortgages are usually for homeowners aged 55 or older. The exact amount depends on your age, the ages of others on title, and the home’s type, condition and appraised value.

When does a reverse mortgage have to be repaid?

According to FCAC, the balance comes due when you sell the home, move out, the last borrower dies, or you default on the loan. Letting the home fall into disrepair can count as a default. The estate usually has a limited time to repay.

Are there costs besides interest?

Yes. FCAC lists appraisal, set-up, legal and closing costs, plus prepayment penalties if you repay early. Some fees can be added to the balance, which means they also compound. This calculator only models the loan amount and interest, so add any fees you finance to the principal input.

Reverse Mortgage Calculator

Model how aggressive compounding interest destroys generational estate transfers over decades.

Last Updated: November 11, 2026

The $300,000 default case, the same loan at the published CHIP rate, the fees, the guarantee, and the HELOC alternative are worked in full in the reverse mortgage guide.

Reverse Mortgage Generational Traps

Current Stasis

Home Appraisal Value ($)

Reverse Borrowed Amount (Lump Sum)

Decay Market Vectors

Posted Compound Interest Rate (%)

Years Held

Home Apprec. (%)

The Legacy Execution (15 Years)

Projected Market Value$1,615,042

Compounded Debt Owed-$971,617

Pure Interest Skimmed by Bank$671,617

Remaining Estate Transfer (Legacy)$643,425

Because reverse mortgages compound semi-annually without monthly payments combating the principal, the debt trajectory scales exponentially against the linear appreciation of the asset class.

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The Compounding Debt Problem

Here is what happens with products like the CHIP Reverse Mortgage: you borrow a lump sum against your home value with no monthly payments required, and the lender adds the interest to what you owe. This calculator defaults to a 7.99% rate compounded semi-annually as an illustration; use the rate and compounding in your own offer.

Without payments pushing down the principal, the debt compounds at the loan rate while the home grows at whatever rate the local market delivers. When the loan rate is well above appreciation, a growing share of the estate goes to the lender each year.

The Compound Debt Formula

Your debt grows using the standard compound interest formula, but because you never make a payment to reduce P, the growth is unmitigated.

D = P \times (1 + \frac{r}{n})^{n \times t}

DTotal future debt balance

PInitial loan amount (lump sum)

rAnnual interest rate (e.g., 0.08)

nCompounding periods per year (usually 2 for semi-annual)

tNumber of years

Manual Example: 10 Years of Erosion

You take a $150,000 reverse mortgage at 8% interest compounded semi-annually for 10 years.

1. Setup Variables

Define the terms.

P = $150, 000, r = 0.08, n = 2, t = 10

2. Calculate Multiplier

The debt will multiply by about 2.19x over 10 years.

(1 + \frac{0.08}{2})^{2 \times 10} = (1.04)^{20} = 2.1911

3. Apply to Principal

Multiply your initial borrowing by the compound factor.

$150, 000 \times 2.1911 = $328, 668

Result

You borrowed $150k, but you now owe about $328.7k, of which about $178.7k is accumulated interest.

$328, 668 Total Owed

How the erosion model works

The debt line is loan x (1 + rate / 2) raised to (2 x years), because the tool compounds twice a year. The home line is home value x (1 + appreciation) raised to the years. Remaining equity is the home value minus the debt, and accumulated interest is the debt minus what you borrowed.

Semi-annual compounding at the 7.99% default works out to an effective annual rate of about 8.15%. At that pace the balance doubles in roughly 8.8 years. Raising the rate shortens that doubling time, a larger loan scales the debt in direct proportion, and higher appreciation helps only the home side.

Second worked example: $200,000 on a $700,000 home over 20 years

Inputs: $700,000 home, $200,000 lump sum, 7% rate, 20 years, 3% yearly appreciation. The debt factor is (1 + 0.07 / 2)^40 = 1.035^40 = 3.9593, so the balance reaches $200,000 x 3.9593 = $791,852. Accumulated interest is $591,852.

The home grows by 1.03^20 = 1.8061 to about $1,264,278. Equity left is $1,264,278 - $791,852 = $472,426. With the calculator's defaults, a $300,000 loan at 7.99% on a $1.2 million home growing 2% leaves about $643,425 after 15 years, against debt of $971,617.

Canadian rules to check before you borrow

FCAC says reverse mortgages are usually for homeowners aged 55 or older and that you can usually borrow up to 55% of the home's current value. Rates are usually higher than those on a regular mortgage or a HELOC, and the interest is added to the balance, so your equity can shrink over time.

The loan comes due when you sell, move out, the last borrower dies, or you default, and letting the home fall into disrepair can count as default. Appraisal, set-up, legal and closing costs apply, some of which may be added to the balance, and repaying early can trigger a prepayment penalty.

Limits and edge cases

Only a single lump sum is modelled; staged withdrawals or regular monthly advances build debt more slowly.
The rate is held fixed for the whole period, although real reverse mortgage rates can change at renewal.
Fees are not added automatically; include any financed fees in the loan amount.
The tool does not stop you entering a loan above the usual 55% of home value, and it lets equity go below zero without applying any contract guarantee.
Appreciation is a constant yearly rate, and selling costs are not deducted from the home value.

Disclaimer: This reverse mortgage model compounds one fixed rate on one lump sum and ignores fees, staged draws and any no-negative-equity terms in your contract. Compare its output with the lender's own illustration and get independent legal advice before signing.

Sources checked

FCAC: Reverse mortgages: usually age 55+, up to 55% of home value, rates usually higher than mortgages or HELOCs, repayment triggers and fees (checked 2026-10-22)
CFPB: What happens if my reverse mortgage balance grows larger than the value of my home?: US HECM heirs pay no more than 95% of appraised value (checked 2026-10-22)

Frequently Asked Questions

What is a reverse mortgage?: A reverse mortgage is a loan secured against the value of your home that requires no monthly mortgage payments. Instead, the interest is added to the loan balance, causing the debt to grow significantly over time. It is repaid when you move, sell, or pass away.
Why does the debt grow so fast?: Because you make no payments, the lender adds interest to the balance, and later interest is charged on that added interest. The Financial Consumer Agency of Canada notes that reverse mortgage rates are usually higher than regular mortgage or HELOC rates, which speeds this up. The calculator compounds twice a year; check how your own contract compounds.
Can I owe more than my house is worth?: In the US, FHA-insured HECM reverse mortgages are non-recourse: the CFPB says heirs will not have to pay more than 95% of the appraised value, and mortgage insurance covers the rest. In Canada, FCAC guidance does not set a federal rule on this, so read your lender’s contract for any guarantee and its conditions. Either way, the equity left for heirs can fall to zero.
How much can I borrow with a Canadian reverse mortgage?: FCAC says you can usually borrow up to 55% of your home’s current value, and that reverse mortgages are usually for homeowners aged 55 or older. The exact amount depends on your age, the ages of others on title, and the home’s type, condition and appraised value.
When does a reverse mortgage have to be repaid?: According to FCAC, the balance comes due when you sell the home, move out, the last borrower dies, or you default on the loan. Letting the home fall into disrepair can count as a default. The estate usually has a limited time to repay.
Are there costs besides interest?: Yes. FCAC lists appraisal, set-up, legal and closing costs, plus prepayment penalties if you repay early. Some fees can be added to the balance, which means they also compound. This calculator only models the loan amount and interest, so add any fees you finance to the principal input.

About the Reverse Mortgage Calculator

Model how a reverse mortgage draws down home equity over time and what remains for heirs.

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Results are estimates; verify regulated rates, eligibility rules, and professional decisions with the cited primary source.