Reverse Mortgage in Canada

Reverse Mortgage in Canada (2026): The Erosion Math, Worked in Full

Short answer: A reverse mortgage lets a homeowner aged 55 or older borrow against home equity with no monthly payments. The interest is added to the balance, so the debt grows every year while the equity shrinks. The Financial Consumer Agency of Canada (FCAC) says you can usually borrow up to 55 percent of the home's current value, and that reverse mortgage rates are usually higher than a regular mortgage or a HELOC. On the calculator's default case, a hypothetical $300,000 loan at 7.99 percent grows to $971,617 in 15 years, while a $1,200,000 home growing at 2 percent a year reaches $1,615,042, leaving $643,425 of equity. The same loan at the published CHIP 5-year special rate of 6.49 percent grows to $781,974 over the same 15 years. Run your own home value, loan, rate, and horizon on the Reverse Mortgage Calculator as you read.

By Finance Editorial Desk | November 11, 2026

Educational only, not tax, legal, or financial advice. Rates below are dated: the CHIP figures are as published by HomeEquity Bank on October 29, 2026, and the other lenders' figures are as read on November 1, 2026. Rates change, and a quote on the day you apply is what counts. Every dollar example is a labeled hypothetical: your age, home value, location, and rate change the numbers. Check the FCAC and lender pages in the sources section before acting.

The decision in 7 steps

1. Work out the most you can borrow: usually up to 55 percent of the appraised value, less when you are younger, and only on a primary residence.
2. Price the loan at the rate you would actually get, not the calculator default: the CHIP 5-year special was 6.49 percent on October 29, 2026, and the posted rate at renewal was 7.09 percent.
3. Run the erosion table for your horizon: at 7.99 percent the balance doubles in about 8.9 years; at 6.49 percent it doubles in about 10.9 years.
4. Add the set-up costs: a CHIP borrower pays $2,495 to $3,095 in closing, appraisal, and legal fees, usually taken from the advance.
5. Read the guarantee in the contract: CHIP and Bloom both promise the estate will not owe more than the home's fair market value, with conditions and exclusions. Canada has no federal rule that says this.
6. Price the alternatives on the same dollars: a HELOC, a refinance, downsizing, or drawing on savings first. Section 8 puts numbers on each.
7. Get independent legal advice before signing, and tell your heirs what the loan will do to the estate. The balance comes due when you sell, move out, or die, and the estate usually has a limited time to repay it.

1. What a reverse mortgage is

A reverse mortgage is a loan secured against your home that requires no monthly payments. You borrow a lump sum, or take the money in stages or as regular payments, and the lender adds the interest to what you owe. The balance is repaid when you sell the home, move out, the last borrower dies, or you default. FCAC lists four default triggers: using the money for anything illegal, being dishonest in the application, letting the home fall into disrepair that lowers its value, and not following a condition in the mortgage contract. Default can lead to foreclosure.

The eligibility rules come from FCAC. The borrower is usually aged 55 or older, and the maximum you can borrow depends on your age and the ages of others on title, the home's condition, type, and appraised value, and the lender. The home must usually be your primary residence, which FCAC defines as living there at least 6 months a year. The money is borrowed money, not income: you pay no tax on it, and FCAC says it does not affect the Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting.

How the money arrives changes what it costs. FCAC describes three ways: a lump sum for the entire amount, part up front and the rest over time, or regular payments. A lump sum means you pay interest on the full amount from day one, so money you do not use right away is an expensive way to borrow. Taking part up front and the rest over time usually requires a minimum first advance of around $25,000, and each later advance can carry a fee or a rate change on the whole balance. Regular payments are typically $1,000 a month or $3,000 every 3 months, with an initial amount of typically around $20,000.

The lenders FCAC names are HomeEquity Bank and Equitable Bank (now marketed as EQ Bank) among federally regulated institutions, plus provincially regulated institutions and mortgage brokers. Two other lenders operate in the market: Bloom Finance, licensed in Ontario, British Columbia, and Alberta, and Home Trust, which sells through brokers. A reverse mortgage can also limit your other options. FCAC notes you may not be able to take out a HELOC at the same time, and you may have to pay off and close any mortgage or HELOC already secured by the home, using the reverse mortgage money to do it.

2. The compounding math

The debt follows the standard compound interest formula, with Canadian mortgages compounding semi-annually:

$D = P \times \left(1 + \frac{r}{2}\right)^{2 \times t}$

D is the debt after t years, P is the amount borrowed, r is the annual rate, and the 2 is the two compounding periods per year. The home grows at whatever rate the market delivers, usually modeled as a single annual rate. The equity left for heirs is the home value minus the debt, and the two numbers move in opposite directions: the debt compounds at the loan rate while the home compounds at the appreciation rate, and the loan rate is almost always the higher of the two.

The doubling time is the fastest way to feel the rate. A balance with no payments doubles in about 10.9 years at 6.49 percent, and in about 8.9 years at 7.99 percent. That is the whole product in one number: every decade or so of no payments, the debt doubles, and the home has to appreciate at the same rate just to hold the equity still.

Two details in the formula matter for the numbers below. First, semi-annual compounding makes the effective annual rate slightly higher than the posted rate: a posted 6.49 percent costs 6.60 percent a year in effect, because each half-year's interest earns interest in the next half-year. Second, the rate in the formula is the rate for the whole period. A real CHIP loan renews at the end of its term at the posted rate then in force, so a 10-year projection at one fixed rate understates the cost if the renewal rate is higher. Section 4 prices that reset.

3. Worked example A: the calculator's default case, checked

The calculator opens with a $1,200,000 home, a $300,000 loan, a 7.99 percent rate, a 15-year horizon, and 2 percent home appreciation. Here is what those defaults produce, computed with the semi-annual formula above:

Three things stand out. First, the equity falls slowly at first and then fast: it drops $18,963 in the first five years and $297,827 in the five years from 15 to 20, because the interest each year is charged on a balance that is itself growing. Second, at 15 years the debt is 60.2 percent of the home's value, and the equity left is 39.8 percent of it. Third, the debt catches the home value at about 23.7 years. Past that point the arithmetic goes negative: at 25 years the debt exceeds the home value by $158,159. That negative number is the arithmetic shortfall, not a bill the estate necessarily pays. Section 6 explains the guarantee that covers it, and the exclusions.

The first year alone costs $24,449 of interest on the $300,000 loan at 7.99 percent. That is the price of the first year of no payments, and it is added to the balance on day one of year two.

4. Worked example B: the same loan at the published CHIP rate, and a smaller loan

The calculator's 7.99 percent default is an illustration, not a quote. HomeEquity Bank published a 5-year fixed special rate of 6.49 percent on October 29, 2026 (6.91 percent APR), with a 3-year fixed at 6.69 percent, a 1-year fixed at 6.99 percent (7.91 percent APR), and a variable rate at 7.11 percent, which was prime plus 2.41 percent with prime at 4.70 percent. The posted 5-year rate, which applies at renewal, was 7.09 percent. Other lenders read on November 1, 2026 were close: EQ Bank's Flex at 6.28 percent and Flex Lite at 6.23 percent, and Bloom at 6.33 percent. The same $300,000 loan on the same $1,200,000 home at 2 percent appreciation, priced at 6.49 percent for the whole period, looks like this:

At 6.49 percent the 15-year debt is $781,974 instead of $971,617, a difference of $189,643, and the equity left is $833,068 instead of $643,425. The first year's interest is $19,786 instead of $24,449. The rate is the whole decision: a 1.5-point difference in the rate is worth almost $190,000 over 15 years on this loan.

The renewal reset eats part of that saving. A $300,000 loan at 6.49 percent for five years grows to $412,868. Renewed for five more years at the posted 7.09 percent, it reaches $584,929 at year 10. If the 6.49 percent rate had held for the full ten years, the debt would be $568,201. The reset costs $16,728 on this loan, and the real renewal rate in five years is unknown today.

A smaller loan changes the picture more than a lower rate does. A hypothetical $150,000 loan at 7.99 percent on the same home grows to $485,808 in 15 years, leaving $1,129,234 of equity. Borrowing half as much leaves almost twice as much equity, because the interest compounds on a smaller base. The cheapest reverse mortgage is the smallest one that covers the need, taken as late as possible.

For scale, a $200,000 loan at 6.49 percent for 10 years grows to $378,801, of which $178,801 is interest. The interest alone is nearly the size of the original loan.

5. What it costs besides interest

Interest is the biggest cost, but it is not the only one. FCAC lists home appraisal fees, set-up fees, prepayment penalties for paying off early, legal fees, and closing costs, and notes the lender may add the fees to the balance, which means they compound too, or charge them up front.

HomeEquity Bank publishes its own closing-cost figures. Its closing and administrative fee is $1,795 to $1,995, the appraisal usually costs around $300 to $400, and independent legal advice costs $400 to $700, for total closing costs of $2,495 to $3,095. Those fees are usually taken from the advance, so a borrower who is approved for $300,000 receives about $297,000 and pays interest on the full $300,000, fees included.

Prepayment terms matter if the loan might end early. CHIP charges no prepayment fee if the last surviving borrower dies, and halves the charge if they move into a nursing home. Borrowers may also pay interest and up to 10 percent of the amount owed each year without penalty. FCAC's general rule is simpler: you can usually repay the principal and interest in full at any time, but paying off early may carry a fee, and the term for repayment depends on the agreement.

The term itself is fixed: CHIP offers 6-month, 1-year, 3-year, and 5-year terms, fixed or variable, with automatic renewal at the current rate when the term ends. That renewal is the reset priced in section 4.

6. The guarantee question: can you owe more than the home is worth?

This is the question every heir asks, and the answer depends on the country and the contract.

In Canada there is no federal rule that caps what the estate owes. FCAC does not state one. The protection is a promise in each lender's contract. HomeEquity Bank's No Negative Equity Guarantee says, as long as the borrower meets their mortgage obligations, the amount payable on the due date will not exceed the fair market value of the home, and if the home depreciates or the amount due is more than the gross proceeds from the sale, HomeEquity Bank covers the difference. The guarantee excludes administrative expenses and interest that accumulates after the due date. Bloom Finance gives the same promise in plainer words: you or your heirs will never owe more than the fair market value of the home at the time of sale.

That guarantee is what stands between the estate and the negative number in section 3. At 25 years on the calculator's defaults, the debt exceeds the home value by $158,159. Under the CHIP or Bloom guarantee, the lender absorbs that shortfall, provided the borrower met their obligations and the home was sold at fair market value. The guarantee does not protect the equity itself: at 25 years there is no equity left to protect. It only caps the loss at zero.

The United States works differently. For a federally insured HECM reverse mortgage, the Consumer Financial Protection Bureau says heirs who sell must repay the full loan balance, or at least 95 percent of the appraised value if the balance is more than the home is worth, and the mortgage insurance covers the rest. Heirs have 30 days after the due-and-payable notice to buy, sell, or turn the home over, with the timeline extendable up to six months. That 95 percent rule is a federal insurance rule for HECMs. It does not apply to a Canadian reverse mortgage.

Two practical points follow. First, read the guarantee in the contract you are offered, including what it excludes, rather than assuming every lender's promise is the same. Second, the estate's clock is short. HomeEquity Bank typically gives an estate six months to pay off the debt. FCAC's general warning is blunter: the time needed to settle an estate may be longer than the time allowed to repay the reverse mortgage, so the executor needs a plan before the loan is signed.

7. Who it fits, and who it does not

The pattern is consistent: a reverse mortgage fits a short horizon and a specific, unavoidable need, and it fails as a long-term income plan or as a way to preserve an inheritance.

8. The alternatives, priced on the same dollars

FCAC's first advice is to compare other options before signing. Here is what the same $300,000 costs elsewhere, priced on the calculator's own 7.99 percent so the comparison isolates the payment structure rather than the rate.

A HELOC, interest-only. The same $300,000 borrowed on a line of credit at 7.99 percent, with interest paid monthly and the balance held flat, costs $1,965 a month. Over 15 years that is $353,707 of interest, and the balance is still $300,000 at the end. The reverse mortgage over the same 15 years costs $671,617 of interest, and the balance is $971,617. The difference, $317,910, is the price of making no payments for 15 years. The real gap is wider than that, because FCAC says reverse mortgage rates are usually higher than HELOC rates, so a real HELOC would usually be priced below 7.99 percent. The HELOC has two conditions the reverse mortgage does not: you must qualify on income, and you must make the monthly payment. The HELOC interest guide works the HELOC math in full.

A conventional refinance. Borrowing the same $300,000 as a regular mortgage means monthly payments of principal and interest, and the balance falls every month instead of growing. The rate is usually lower than a reverse mortgage rate, and the loan ends with the home owned outright. The trade is qualification and cash flow: the payments have to fit the monthly budget. The mortgage refinance break-even guide prices when a refinance pays for itself, and the Canadian mortgage guide covers the structure.

Downsizing. Selling a $1,200,000 home and buying a smaller one releases equity with no interest at all, and no lender, no guarantee, and no estate deadline. The costs are the ones a sale always carries: realtor commission, legal fees, land transfer tax on the purchase, and moving. Whether it wins depends on the price gap between the two homes and on whether the borrower wants to move. The rent vs buy guide prices the buy side of that decision.

Drawing on savings first. If the need is a few thousand dollars a year rather than a lump sum, spending from a TFSA or an emergency fund costs nothing in interest and leaves the home alone. The emergency fund guide sizes the fund, and the RRSP meltdown guide prices a different drawdown lever for retirees with registered savings. If the need is to clear expensive debts, the debt consolidation guide prices that move first, because a reverse mortgage used to pay off a credit card replaces 20 percent card interest with 7 percent mortgage interest, which is a win, but a HELOC or a loan would do the same for less.

Leaving money to heirs another way. If the goal is to leave a fixed sum to children, term life insurance is usually cheaper than reverse mortgage interest. A reverse mortgage that leaves $643,425 of equity after 15 years has cost $671,617 of interest to produce that outcome. The term vs whole life guide prices the insurance side. The comparison only works if the borrower can qualify for the insurance and afford the premiums, which is not always true at 75.

9. What the calculator does, and where it simplifies

The Reverse Mortgage Calculator takes five inputs: the home appraisal value, the lump-sum amount borrowed, the posted interest rate, the years held, and the home appreciation rate. It returns the projected market value, the compounded debt, the interest accumulated, and the equity remaining. Its defaults are a $1,200,000 home, a $300,000 loan, a 7.99 percent rate, 15 years, and 2 percent appreciation, which give a $1,615,042 home value, a $971,617 debt, $671,617 of interest, and $643,425 of equity left.

Four simplifications matter. The model is a single lump sum at a single fixed rate for the whole period: it does not model staged draws, monthly advances, or a renewal at a higher posted rate, so a real CHIP loan that renews at 7.09 percent after five years costs more than the calculator shows at 6.49 percent. The model does not include set-up fees: the $2,495 to $3,095 of CHIP closing costs are not in the loan amount, so add any fees you finance to the principal input, as the calculator page itself advises. The model does not apply any lender guarantee: the remaining equity can go negative, as it does at 25 years on the defaults, and the guarantee would cap what the estate pays rather than what the arithmetic shows. And the model's 7.99 percent default sits above the published CHIP 5-year special rate of 6.49 percent, so the default case is more expensive than a new CHIP loan at the special rate. Use the calculator to see the shape of the trade-off at your own rate and horizon, then get a dated quote and read the guarantee before deciding.

One correction to the calculator page's wording: the page calls the tool a legacy calculator and talks about the debt destroying the estate. The math is less dramatic than the wording. The debt grows at the loan rate and the equity shrinks, but the estate is not destroyed: the guarantee caps the loss at the home's value, the borrower keeps ownership throughout, and a small, late loan leaves most of the equity intact. Price the loan on the numbers, not the labels.

10. How to do it

Start with the need, not the product. Write down the exact amount and the exact purpose: a roof, a debt, care costs, or monthly shortfall. If the need is monthly income, a reverse mortgage is the wrong shape, and the alternatives in section 8 come first. If the need is a lump sum, get the maximum from the lender in writing, with the age and appraisal it is based on, and borrow only the amount the need requires.

Get two quotes, not one. HomeEquity Bank and EQ Bank are the federally regulated lenders FCAC names, and Bloom and Home Trust also lend. Compare the rate, the term, the renewal rate, the set-up fees, the prepayment terms, and the guarantee, in writing. Ask each lender what happens if you move into care, what happens if the home needs major repairs, and how long the estate has to repay. Ask whether the rate is a special that expires and what the posted rate will be at renewal.

Get independent legal advice before signing. CHIP requires it before funding, and FCAC says some provinces and territories require it while others do not. A lawyer who does not work for the lender reads the guarantee, the default triggers, and the repayment clock, and explains them to you and to your heirs. Tell your executor and your children the loan exists, what it will owe, and when it comes due. The most common reverse mortgage dispute is not the rate: it is an heir who learns about the loan after the borrower has died.

11. Sources

• Financial Consumer Agency of Canada, "Reverse mortgages": usually 55 or older, usually borrow up to 55 percent of the current value, primary residence usually 6 months a year, rates usually higher than a mortgage or HELOC, fees list, lump sum and staged and regular payment options with typical minimums around $25,000 and $20,000, repayment on sale, move, death, or default, default triggers and foreclosure, no tax on borrowed money, no effect on OAS or GIS, independent legal advice in some provinces and territories, federally regulated lenders HomeEquity Bank and Equitable Bank (canada.ca/en/financial-consumer-agency/services/mortgages/reverse-mortgages.html, read November 11, 2026).
• HomeEquity Bank, "Reverse Mortgage Closing Costs and Foreclosure": closing and administrative fee $1,795 to $1,995, appraisal usually around $300 to $400, independent legal advice $400 to $700, total closing costs $2,495 to $3,095, No Negative Equity Guarantee wording, estate typically given six months, no prepayment charge if the last surviving borrower dies, charge halved for a move to a nursing home, borrowers may pay interest and up to 10 percent of the amount owed each year, terms of 6 months, 1 year, 3 years, or 5 years with automatic renewal (chip.ca/reverse-mortgage-resources/reverse-mortgage/reverse-mortgage-closing-cost-and-foreclosure/, read November 11, 2026).
• HomeEquity Bank CHIP rates, as published by the lender on October 29, 2026: 5-year fixed special 6.49 percent (6.91 percent APR), 3-year fixed 6.69 percent, 1-year fixed 6.99 percent (7.91 percent APR), variable 7.11 percent (prime plus 2.41 percent, prime 4.70 percent), 5-year fixed posted 7.09 percent; CHIP Max 5-year fixed 8.54 percent and variable 8.36 percent; CHIP Open variable 9.20 percent. Read from the lender's pages by two independent rate trackers on November 1, 2026 (reversemortgaged.ca/guides/reverse-mortgage-rates and jenny.mortgage/blog/chip-reverse-mortgage-reviews.html). EQ Bank Flex 6.28 percent, Flex Lite 6.23 percent, and Bloom 6.33 percent are from the same November 1, 2026 reads. Rates change; a quote on the day you apply is what counts.
• Bloom Finance Company Ltd.: reverse mortgage for homeowners 55 and older, access up to 55 percent of home value in tax-free cash, no required monthly payments, Home Equity Guarantee that you or your heirs will never owe more than the fair market value of the home at the time of sale, licensed in Ontario, British Columbia, and Alberta, funds not taxable income and no effect on CPP, GIS, or OAS (bloomfin.ca, read November 11, 2026).
• Consumer Financial Protection Bureau, "With a reverse mortgage loan, can my heirs keep or sell my home after I die?": heirs must pay the full loan balance to keep the home, or at least 95 percent of appraised value to sell if the balance is higher, 30 days after the due-and-payable notice with extensions up to six months; and "What happens if my reverse mortgage loan balance grows larger than the value of my home?": heirs will not have to pay more than 95 percent of the appraised value, mortgage insurance covers the rest, for HECMs only (consumerfinance.gov, read November 11, 2026).
• Office of the Superintendent of Financial Institutions, Advisory on the treatment of innovative real estate secured lending products under Guideline B-20, June 30, 2022: reverse mortgages expected to carry a maximum of 65 percent loan-to-value at origination in federally regulated institutions' risk policies.
• Calculator defaults and worked examples in this guide are computed from the compound interest formula with semi-annual compounding, the same formula the site's reverse mortgage calculator uses. The $200,000 at 6.49 percent for 10 years figure ($378,801 owed, $178,801 interest) matches the published worked example on reversemortgaged.ca/guides/costs-and-fees.