For many Canadians aged 55 and older, much of their wealth is tied up in their homes. While this equity provides financial security, it doesn’t always help with everyday retirement expenses, especially as the cost of living rises and fixed incomes are stretched. That’s where a reverse mortgage can make a difference.
A reverse mortgage lets you access up to 55% of your home’s value, tax-free, without selling, downsizing, or making monthly payments. Repayment (plus interest) is only required when you move out, sell your home, or pass away. Before deciding if a reverse mortgage is right for you, here are the main factors to consider:
1. Stay in Your Home, Maintain Your Lifestyle
A reverse mortgage allows you to remain in your home while unlocking funds to improve your retirement lifestyle. Whether you want to cover medical expenses, renovate, support family, or simply enjoy retirement more fully, this option gives you financial flexibility without uprooting your life.
2. No Regular Payments Required
Unlike traditional loans, reverse mortgages don’t require monthly payments. This can significantly reduce financial stress for retirees living on fixed incomes. The loan is repaid from the proceeds when the home is eventually sold.
3. Tax-Free Cash Flow
Funds from a reverse mortgage are not considered taxable income. This means they won’t impact your Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits, making them an efficient way to supplement your retirement income.
4. Flexible Payout Options
You can receive your funds as a lump sum, in regular installments, or a combination of both. This flexibility allows you to tailor your cash flow to your unique needs—whether you’re planning for ongoing expenses or covering one-time costs.
5. You Remain the Homeowner
With a reverse mortgage, you keep full ownership and title of your home. You’re still responsible for property taxes, insurance, and maintenance, but you can sell the home at any time and use any remaining equity as you wish.
6. Estate Planning Considerations
Reverse mortgages include a “no negative equity guarantee,” ensuring you or your estate never owe more than the home’s value at the time of sale. However, because interest accumulates over time, the amount left for your heirs may be reduced. It’s wise to discuss your plans with family and estate advisors.
Is a Reverse Mortgage Right for You?
Reverse mortgages are best suited for homeowners who are asset-rich but cash-flow-limited and want to remain in their homes. As with any major financial decision, it’s important to speak with a mortgage professional to review your options, understand the long-term impact, and ensure this solution fits your needs.
Your home has provided you with security—now it can help support your retirement goals.
