Reverse mortgages can offer financial flexibility in retirement, but the process is a bit different from a traditional mortgage. If you’re exploring this option, here’s a clear, step-by-step guide to help you understand what’s involved and how to prepare.
Step 1: Make Sure You’re Eligible
To qualify, you must:
- Be at least 55 years old
- Own your home (it must be your primary residence)
- Have sufficient home equity (usually at least 50% ownership)
- Live in a qualifying property type (most detached, semi-detached, townhomes, and condos in urban areas are eligible)
If there are two homeowners on the title, both must meet the age requirement.
Step 2: Estimate How Much You Can Borrow
You can borrow up to 55% of your home’s appraised value, depending on:
- Your age (older applicants qualify for more)
- Home value and condition
- Location and type of property
Most lenders offer free estimates through a mortgage broker to give you a rough idea of what you might qualify for.
Step 3: Meet with a Mortgage Advisor or Broker
It’s strongly recommended to speak with a licensed mortgage broker or advisor who specializes in reverse mortgages. They will:
- Help assess if a reverse mortgage is right for your situation
- Compare offers from the two main Canadian providers: HomeEquity Bank (CHIP) and Equitable Bank
- Explain repayment options, interest rates, and possible alternatives (like a HELOC)
If you would like us to connect you to a local mortgage broker fill in a quick form at the bottom of this page.
Step 4: Apply for the Reverse Mortgage
Once you’re confident it’s the right option, your advisor will guide you through the application. You’ll need to provide:
- Personal identification
- Proof of property ownership
- Property tax statements
- Home insurance documentation
- Details on any outstanding loans or liens on the home
Step 5: Property Appraisal
The lender will arrange for a professional appraisal to determine the current market value of your home. This is a key factor in how much you can borrow.
The appraisal fee (typically around $300–$500) is usually paid upfront or deducted from the loan proceeds.
Step 6: Receive a Loan Offer
After reviewing your application and the appraisal report, the lender will provide you with:
- A loan approval letter
- A disclosure statement outlining the interest rate, terms, fees, and repayment conditions
Review these carefully with your mortgage advisor.
Step 7: Get Independent Legal Advice (Required)
Before the reverse mortgage is finalized, Canadian law requires you to consult an independent lawyer who will:
- Ensure you fully understand the contract
- Protect your rights as a borrower
- Explain how the loan may affect your estate or family
This step gives you time to ask questions and confirm you’re making an informed decision.
Step 8: Sign the Final Agreement
Once you’ve received legal advice and are ready to proceed, you’ll:
- Sign the reverse mortgage agreement
- Finalize the paperwork with your lawyer and lender
Step 9: Receive Your Funds
You can choose to receive the money in:
- A lump sum
- Regular monthly/quarterly payments
- A combination of both
Funds are typically deposited directly into your bank account. Setup and legal fees may be deducted from your first advance.
Step 10: Manage Your Home and Enjoy Your Equity
After receiving your funds, you:
- Continue to live in your home
- Remain responsible for property taxes, home insurance, and maintenance
- Do not make monthly payments
The loan will only be repaid when you sell your home, move into long-term care, or pass away. Any remaining equity belongs to you or your estate.
Bonus Tip: Review Annually
Even though no payments are required, it’s wise to review your reverse mortgage annually with your financial advisor. This helps you:
- Track how interest is compounding
- Consider prepayment options if your situation changes
- Keep your estate plan updated
