What a reverse mortgage actually costs an Ontario retiree — and the four myths worth retiring first.
House-rich and cash-tight is one of the most common situations I see with clients in their late sixties and seventies. The home is worth far more than they paid, the mortgage is small or gone, but the monthly money feels tight — and selling the place they raised a family in has no appeal. A reverse mortgage is one tool that can help here, and it’s also one of the most misunderstood products in Canadian lending. This is a good moment to slow down and look at it honestly.
A reverse mortgage lets a homeowner aged 55 or older borrow against the equity in their home without making regular payments. The loan, plus the interest that builds up on it, is repaid later — usually when the home is sold, when the owner moves out permanently, or after they pass away. In Canada the two main providers are HomeEquity Bank, through its CHIP product, and Equitable Bank. Both are federally regulated.
How a reverse mortgage works in plain terms
You receive money — as a lump sum, as scheduled advances, or a mix — and you stay on title as the owner. There’s no requirement to make monthly principal-and-interest payments, which is the whole point for someone on a fixed retirement income. Interest accrues on the balance instead of being paid down, so the amount owing grows over time rather than shrinking.
How much you can borrow depends on your age, your home’s value and location, and the lender’s program — generally a percentage of the home’s value that rises as you get older. As of mid-2026, reverse mortgage rates have been running higher than ordinary mortgages: roughly the mid-6% range on a 5-year fixed from the major providers, versus closer to 4% for a standard insured 5-year fixed. That gap is the trade-off for borrowing with no required payments, and it matters, because of the next point.
The cost: compounding works in reverse
Because you’re not making payments, interest compounds on a growing balance. On a $200,000 reverse mortgage at roughly 6.5%, the balance would roughly double in about eleven years if nothing is repaid. That’s not a reason to avoid the product — it’s a reason to size it to a real need and a real time horizon. A reverse mortgage used for five years to bridge a specific gap behaves very differently from one left untouched for twenty.
Four myths worth retiring
“The bank can take my home.” With CHIP and Equitable, you remain the owner on title. As long as you keep the property as your primary residence, stay current on property taxes and insurance, and maintain the home, you keep living there.
“I could owe more than the house is worth.” Both major Canadian providers carry a no-negative-equity guarantee: provided you meet your obligations, you’ll never owe more than the fair market value of the home at the time it’s sold.
“My kids will inherit the debt.” The estate repays the loan, almost always from the sale of the home — not out of your children’s own pockets. What heirs inherit is whatever equity remains after the balance is settled.
“It’s a last resort for desperate people.” Increasingly it’s used as deliberate retirement-income planning — covering a renovation to age in place, supplementing income without drawing down investments in a down market, or helping with a grandchild’s education. The product is neutral; the plan around it is what matters.
A worked Waterloo Region example
Consider a composite couple, both 70, in a Waterloo detached home worth about $850,000 with no mortgage left. They want roughly $120,000 to renovate a main-floor bathroom and bedroom so they can stay put, plus a small monthly top-up. A reverse mortgage at around 6.5% with no required payments keeps their cashflow intact and leaves their investments alone.
The honest part: if they take $120,000 and make no payments, that balance grows. In roughly eleven years it could approach $240,000. Against an $850,000 home, even with flat-to-soft local prices, meaningful equity very likely remains — but they should see those numbers before signing, not after. For a different couple who only need a bridge for two or three years, a HELOC or a conventional refinance might cost far less, but does require qualifying income to be approved. The right answer depends entirely on the need, the time horizon, and the alternatives.
What to do this week:
- Write down the actual number you need and what it’s for. A reverse mortgage sized to a real purpose is very different from an open-ended draw.
- Ask for a side-by-side: reverse mortgage versus HELOC versus a conventional refinance. Each has a place.
- Confirm the rate, the setup costs, and any current promotions in writing.
- Loop in your family and, ideally, your accountant — this is a household decision.
A reverse mortgage can be a genuinely good fit, a poor fit, or beside the point — and you deserve to know which before anyone fills out a form. Reach out if you want to discuss whether this is a fit for you or someone you know.