What a reverse mortgage actually is
It is a loan secured against your home, like any other mortgage. What makes it different is that you are not required to make regular payments on it. The interest is added to the balance instead, and the whole amount is settled later — normally when the home is sold.
The Financial Consumer Agency of Canada describes it plainly: it is a loan that lets you get money from your home equity without having to sell, and you don't need to make any regular payments on it (FCAC). You keep title to the property throughout. HomeEquity Bank states it directly: you always retain the ownership of your home and maintain title (HomeEquity Bank).
Who qualifies
The rules are narrower than most mortgages, and they are mostly about age and the property rather than income.
- Age 55 or older. FCAC gives the qualifying age as usually 55 or older, and both Canadian providers set it at 55. Where a home is owned jointly, the age of the younger owner is the one that counts.
- It has to be your primary residence. FCAC describes this as typically living in the home at least six months a year.
- A minimum home value. Both HomeEquity Bank and Equitable Bank set a floor of $250,000 in appraised value.
- Standard property types. Detached, semi-detached, townhouses, condos and small multiplexes are generally acceptable. Equitable Bank excludes modular homes and secondary or seasonal properties.
Notice what is not on that list. There is no income test in the way you would face on a conventional mortgage, and the qualifying stress test that governs ordinary borrowing does not apply here in the same way. That is precisely why the product exists — it is built for people whose wealth is in the house rather than in monthly cash flow.
How much you can actually access
FCAC puts the ceiling at up to 55% of the current value of your home. That is the figure to hold in mind, and it is a maximum rather than a starting point. HomeEquity Bank offers up to 55% of appraised value (HomeEquity Bank); Equitable Bank goes to up to 59% (Equitable Bank).
Where you land inside that range depends mostly on age — an applicant in their seventies will be offered a materially higher percentage than one who has just turned 55 — along with the property type, its location and its condition. Two people with identically valued homes in Kelowna can be quoted very different amounts for that reason alone.
This is also the part most worth shopping. Only two lenders write reverse mortgages in Canada at any scale, and they do not assess the same file the same way. Equitable Bank lends in major urban centres in British Columbia, Alberta, Ontario and Quebec; HomeEquity Bank lends across the country. Whether a particular Okanagan property fits one, both or neither is a question worth answering before anything else.
How the money reaches you
You are not obliged to take the whole amount at once. HomeEquity Bank sets out three ways to receive it: a lump sum, monthly advances, or quarterly advances (HomeEquity Bank). Taking it in instalments means interest only accrues on what you have actually drawn, which is usually the cheaper path if the goal is to supplement income rather than fund something specific.
The money is borrowed rather than earned, and FCAC confirms the tax consequence: you don't pay tax on the money you borrow.
What it costs
Two things make up the cost. The first is interest, which accrues on the balance rather than being paid down monthly — so the amount owing grows over time rather than shrinking. FCAC notes that the interest rate on a reverse mortgage is usually higher than on a regular mortgage, which is the trade for not making payments.
The second is the set-up. FCAC lists home appraisal fees, set-up fees, legal fees, closing costs, and prepayment charges if the mortgage is repaid before it is due. These are one-time and are normally deducted from the advance rather than paid out of pocket.
There is a protection worth knowing about on the other side of the ledger. HomeEquity Bank guarantees that the amount you or your estate eventually has to repay will never exceed the fair market value of the home at the time it is sold. In practice that caps the downside for an estate even if the balance compounds for a long time.
When it gets repaid
FCAC lists the triggers: when you sell the home, when you move out of it, when the last borrower dies, or if you default on the terms. In the ordinary case that means the balance is settled out of the sale proceeds, and whatever equity remains goes to you or to your estate.
The practical conditions in between are the ones you would expect of any mortgage — the home stays your principal residence, stays insured, stays in reasonable repair, and the property taxes stay current.
How it compares to the alternatives
A reverse mortgage is not the only way to reach the equity in a home, and it is not automatically the best one. The honest comparison looks like this:
- A refinance gives access to up to 80% of the home's value rather than 55–59%, and the interest rate is lower — but it requires you to qualify on income and to make monthly payments. If the income supports it, this is usually the cheaper route. There is more on how that works on the refinance page.
- A HELOC is flexible and interest-only, but it still requires qualifying and still requires monthly interest payments, and the lender can reduce or freeze the limit.
- Downsizing releases the equity outright with no borrowing cost at all. Whether that is preferable is rarely a financial question alone.
- A reverse mortgage is the one that works when the income does not support monthly payments and staying in the home matters more than maximising the estate.
That last line is the real test. Where a reverse mortgage genuinely fits, it fits well. Where a refinance would also work, a refinance usually costs less. Working out which of those describes your situation takes one conversation and no commitment.
A note on doing this with family in the room
A reverse mortgage affects what is left in an estate, and that makes it a decision people generally want to make with the people it will eventually affect. Adult children often have questions, and those questions are usually fair ones. I am happy to go through the numbers with everyone present. Both lenders also require independent legal advice before completion, which is a protection rather than a hurdle.