Plain Facts

The short answer: You can use the money however you please.

Reverse mortgages in Canada are designed for people aged 55+, who are usually on fixed incomes (regardless of the amount of monthly income). Because of this, there are no required monthly payments.

You will.  You maintain full title and ownership of your home.

You are in charge. You have control. You maintain ownership of your home. The bank (lender) will not own your home.

Unlike in the USA, in Canada reverse mortgages are very conservative and designed to protect both the homeowner and the equity in the home. This makes them very safe. In Canada only the most highly-regulated banks (called "Schedule 1 Banks") provide reverse mortgages. These banks are federally-regulated, under the scrutiny of OSFI, the Office of the Superintendent of Financial Institutions. Reverse mortgage lenders in Canada are under the same regulations as Canada's "Big Six" banks, which are RBC, Bank of Montreal, CIBC, TD, Scotiabank, and National Bank of Canada. Some additional features of reverse mortgage lenders in Canada are below. Reverse mortgages in Canada are based on conservative lending practices. This mean that the lenders will never allow more than 55% of the home’s equity to be borrowed. Lenders guarantee fair-market value if the reverse mortgage value exceeds the property value. If the property decreases to a point where it is below the mortgage value, the lender will absorb the shortfall.

You can convert up to 55% of your home's value into tax-free cash. 55% is the maximum amount a homeowner can qualify for. How much you qualify for depends primarily on three things: (1) your age, (2) your property, and (3) your property's location. For example:

For an exact number, click the button below to answer three quick questions and we'll give you an exact number within 1 to 12 hours. Or call 1-888-228-0082.

A reverse mortgage can be paid back at any time. Repayment usually occurs when homeowners sell or move. Since over 90% of Canadians 60+ want to remain in their homes as long as possible, most reverse mortgages are paid back when the homeowners have passed away.

Repayment is only required when the homeowners choose to move, or to sell the home. Usually the home is sold and the money from the sale is used to pay back the reverse mortgage, and then the remaining cash is paid to the homeowners or to their Estate. If the homeowners pass away, for example, and the inheriting parties choose to keep the home, then they can pay back the reverse mortgage by using/obtaining financing of their choice.

That's up to you. As long as your home remains your primary residence, and you keep your property well-maintained, and you pay your home insurance and property taxes, the loan can last as long as you want. If one of the homeowners (for example, a spouse) passes away, the other homeowner can continue living in the home as long as he or she wishes, as long as these simple conditions are met.

Nothing changes with your reverse mortgage. You will continue to have peace of mind. The loan amount can't be demanded by the bank because the property decreases in value.

If your home increases in value, then those gains in value (equity) are all yours. In addition, you'll have the option to refinance the reverse mortgage (if you choose to) and convert the additional equity into more cash.

The homeowner keeps all the equity remaining in the home after the reverse mortgage is paid off. In over 30 years (since 1986, when reverse mortgages were first offered in Canada), over 99% of homeowners have equity left over when their reverse mortgage is repaid. On average, the amount of equity left over is more than 50% of the value of the home.

How much equity you have will depend on three things, (1) how much you borrow, (2) the home's fair market value, and (3) the amount of time that passes from the date the reverse mortgage is first put on your home.

The interest rates for reverse mortgages are modestly higher than the interest rates for conventional bank mortgages, but much lower than the interest rates of private mortgages.

Why is this? It's because reverse mortgages are far riskier for the bank than conventional mortgages. Unlike getting a conventional mortgage, qualifying for a reverse mortgage is based strictly on the homeowner's age and property value. There are no required monthly payments. Lastly, reverse mortgages, unlike conventional mortgages, are not demand loans (they are not "callable" loans), which means the lenders can never demand payment, cancel the loan, or force you to re-qualify as long as you live in the home, keep the property taxes and insurance up to date, and maintain the home in proper condition.

To see current rates for reverse mortgages in Canada, click here.

If a home rises enough in value, then this rise can offset some (or all) of the amount of reverse mortgage interest accruing against the home. This has not been uncommon in many big Canadian cities, especially in Ontario and British Columbia, where rising home values have outperformed many other investment types.

To see how this works, click here to use your home's value in different scenarios of rising home values and reverse mortgage interest rates.

No, they won't. The cash from a reverse mortgage is tax-free income. Any government benefits you receive, such as Canada Pension Plan (CPP), Old Age Security (OAS), or Guaranteed Income Supplement (GIS) will not be affected.

Not a problem. Many Canadians use reverse mortgage funds to pay off existing mortgages and even other debts as well, such as credit card debt, car loans, and so on. Any debts secured by the home (such as existing mortgages, lines of credit, home equity loans, liens, etc.) must be paid off from the reverse mortgage funds. The homeowner gets all the remaining reverse mortgage funds.

Most people underestimate how disruptive downsizing really is. There are many expenses; moreover, it usually ends up taking longer and being more complex than expected. Lastly, homeowners underestimate how drastically it changes their lifestyles. Because home prices are currently so high in Canada, downsizing usually means at least two things: (1) moving into a smaller home, and (2) moving to a different neighbourhood, city, or even province. Most Canadians don't want to leave the neighbourhoods they love. Many Canadians downsize in order to free up money for retirement, but the extra cash is often gone sooner than they expect. Expenses often add up with renovations, unexpected costs, commissions paid to real estate brokers, legal fees paid to lawyers, and lastly, land transfer taxes. A reverse mortgage is a much more controllable, predictable way for homeowners to secure safe funds after they reach 55 years of age.

Absolutely not. Financial planners and wealth managers are increasingly recommending reverse mortgages as an important component of a comprehensive, tax-efficient retirement plan. The real loans of last resort are home equity loans and private mortgages - their fees and interest rates are prohibitive to most people on fixed incomes, and as "demand loans" they put the homeowner in danger of foreclosure and eviction. Reverse mortgages, on the other hand, have fair interest rates, come exclusively from Canada's most highly-regulated banks, and will never require the homeowners to leave the home.

Lotus Income charges no fees to the homeowner. Lotus Income's services are 100% free to the homeowner. The only upfront expense for the homeowner is the home-appraisal fee, which is paid to the independent home appraiser. This typically costs $250 to $450. The other fees are all paid out of the mortgage funds. The three fees for a reverse mortgage in Canada are: (1) home appraisal fee (a one-time fee paid to the home appraiser, typically $250 to $450), (2) the fee for independent legal advice (a one-time fee paid to the homeowner's lawyer, typically $200 to $1000), and (3) the loan set-up and administration fee (a one-time fee paid directly to the reverse mortgage lender (the bank), which costs $1795. Nothing is paid by the homeowner to Lotus Income. Again, the only fee that the homeowner pays out of pocket is the appraisal fee.