House rich, cash poor: When a reverse mortgage might make sense

After catching you up on some of the big stories of the week, Amanda Lang discusses why despite the Bank of Canada keeping interest rates unchanged, mortgage rates may become pricier, with Penelope Graham, Head of Content at Ratehub.Ca

Reverse mortgages were at one time considered the Wild West of financial products, associated with aggressive and even predatory sales tactics targeting seniors in the United States.

Fairly or not, that reputation has instilled some wariness in Canada, where regulations have long been more stringent than they were during the industry’s early days south of the border. Nowadays, some experts say they’re an option worth considering for older Canadians who are house rich, cash poor and well aware of the pros and cons.

“It could be a beneficial tool for certain people, but not for others,” says Barbara Knoblach, an Edmonton-based financial planner at Money Coaches Canada.

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Reverse mortgages are available to Canadian homeowners who are 55 and older. Up to 55 per cent of the equity built up in the home can be unlocked tax-free in a lump sum or incremental payments, usually at interest rates two to three per cent higher than what a conventional mortgage would carry.

Unlike a traditional mortgage, the loan and interest is not paid back in regular intervals. Instead, that happens when the homeowner moves, sells or dies. In the case of death, the loan and interest repayment becomes the responsibility of the homeowner’s estate.

The homeowner retains the title and cannot be forced out of the property. In Canada there are also consumer protections against the borrower having to pay back more than what the home is worth.

Homeowners have some responsibilities during the life of the loan. The properties must not be allowed to fall into a state of disrepair that would decrease the value. They also remain on the hook for property taxes and homeowners insurance.

There are other costs to be aware of, including legal, appraisal and closing fees. There might also be prepayment penalties if you pay before the term is up.

One of the knocks against reverse mortgages is that with years of interest piling up at high rates, there’s seldom much equity, if any, left by the time the homeowner passes on.

“The client for whom this could be a fit would be the person who doesn’t care so much about estate preservation. They may not have any children or other people that they want to leave an estate to,” says Knoblach.

“They would say, ‘This is my house. I’ve worked toward it and I want to stay here. And, if at the end of my life, all the equity is gone, I do not really care. I’ve had my retirement where I wanted to live.’”

For some cash-strapped homeowners wanting to leverage their home equity, there may be better options, says Knoblach. Downsizing to a smaller property is one. And for someone still earning an income, home equity lines of credit usually have more flexibility and better rates.

“They should work with a financial planner or with somebody knowledgeable before they make a decision to get into this type of product that they cannot extract themselves out of,” she says.

Knoblach also cautions against using funds from a reverse mortgage to finance a lifestyle that would otherwise not be sustainable.

Meanwhile, Anthony Quinn, president of the Canadian Association of Retired Persons, says a reverse mortgage can be life changing.

The advocacy group has long endorsed the CHIP Reverse Mortgage offered by HomeEquity Bank.

“We did a lot of due diligence into the product and found that it was a unique answer to the questions that our members had,” says Quinn.

“We found it really was not for everyone, but for a segment of Canadians who own their homes either outright or have a small remaining mortgage and want to access the value in that home without doing what would be unthinkable for them, which is moving out of their house.”

Downsizing is often not a viable option, as there’s no guarantee a lower-cost property is available where someone has spent decades building social ties and a support system, Quinn says.

As for the estate considerations, Quinn says it’s up to homeowners to decide what they want to accomplish.

“In actual fact, what we hear is oftentimes they are taking money out to help their adult children in the now rather than in the future through their will,” he says. “And they’re taking money for children and grandchildren for their education.”

Quinn rankles at the “paternalism” and “ageism” that he often hears creep into the discussion over reverse mortgages — views along the lines of “we don’t want mom or dad or grandma or grandpa having access to their money because they might do something frivolous with it.”

Tapping their home equity could allow homeowners to make accessibility improvements to their homes that would enable them to stay longer, purchase or maintain a vehicle or just be more choosy at the grocery store, Quinn says.

“Older Canadians have done the right thing,” he says. “They were told that they should invest in their home.”

This report by The Canadian Press was first published July 9, 2026.

Lauren Krugel, The Canadian Press