If you’re a homeowner over 55 looking to access your home equity—without selling your property—there are several financial tools available. While a reverse mortgage can be a good solution for some, it’s important to compare it to other options like a HELOC, refinancing, downsizing, and renting part of your home.
Here’s a side-by-side breakdown to help you understand how each option works, and when it may or may not make sense.
1. Reverse Mortgage
What it is: A loan secured against your home equity, available to Canadians aged 55+, with no monthly payments. The loan is repaid when you sell, move out, or pass away.
Pros:
- No required monthly payments
- Tax-free lump sum or ongoing payments
- You remain the owner of your home
- Easy to qualify (no income or credit needed)
Cons:
- Higher interest rates than other borrowing options
- Interest compounds over time, reducing equity
- Fees (setup, legal, appraisal)
- Smaller estate for heirs
Best for: Retirees with significant home equity and limited income who want to stay in their home long-term
2. Home Equity Line of Credit (HELOC)
What it is: A revolving credit line secured by your home. You borrow what you need and repay with interest monthly.
Pros:
- Lower interest rates
- Only pay interest on what you use
- Flexibility to draw funds as needed
- Can be reused and repaid repeatedly
Cons:
- Requires income, credit check, and approval
- Monthly payments required
- Bank can reduce or cancel credit line
- Risk of losing home if payments are missed
Best for: Homeowners with strong credit and stable income who want flexible, low-cost access to equity
3. Mortgage Refinance
What it is: Breaking your existing mortgage to take out a new one, often to access additional home equity or secure better terms.
Pros:
- Lower interest than reverse mortgage
- Access up to 80% of your home’s value
- Can consolidate high-interest debt
Cons:
- Must qualify with income and credit
- Monthly payments required
- Penalty fees for breaking your current mortgage
- Adds long-term debt in retirement
Best for: Homeowners who are still earning income and can handle payments over time
4. Downsizing
What it is: Selling your current home and buying a smaller, less expensive one. The leftover cash is your unlocked equity.
Pros:
- Access to a large amount of equity
- Potential for lower property taxes and expenses
- No debt involved
Cons:
- Emotional impact of leaving your home
- Costs related to moving, legal fees, realtor fees
- Timing the market can be tricky
Best for: Homeowners who are open to relocating and want to reduce expenses
5. Renting Out Part of Your Home
What it is: Leasing a portion of your property (basement, suite, room) to generate rental income.
Pros:
- Generates monthly cash flow
- No loans or interest
- Helps offset expenses while keeping your home
Cons:
- Loss of privacy and personal space
- May require renovations
- Responsibilities as a landlord (repairs, tenant management)
- Income is taxable
Best for: Homeowners willing and able to share their space and handle basic rental responsibilities
6. Government Assistance Programs
What it is: Grants, tax relief, or benefit programs available to seniors to help with home repairs, living expenses, or housing affordability.
Pros:
- No repayment required
- Helps reduce expenses
- Supports aging in place
Cons:
- Limited availability or income caps
- Smaller dollar amounts compared to loans
- May require applications and approvals
Best for: Seniors with modest needs who want to supplement income or maintain their home
Summary Comparison Table
| Option | Monthly Payments | Access to Equity | Credit/Income Required | Key Advantage | Key Risk/Cost |
|---|---|---|---|---|---|
| Reverse Mortgage | No | Up to 55% | No | No payments required | Compounding interest, estate impact |
| HELOC | Yes (interest only) | Up to 65% | Yes | Flexible, low-cost borrowing | Must repay monthly, credit risk |
| Mortgage Refinance | Yes | Up to 80% | Yes | Large lump sum, lower interest | Long-term payments, penalties |
| Downsizing | No | Up to 100% | No | Full access to equity, no debt | Emotional cost of moving |
| Renting Out Home Space | No (income-generating) | None (cash flow) | No | Monthly income | Privacy, landlord responsibilities |
| Gov’t Support Programs | No | N/A | Income-based | Free financial support | Limited funding or availability |
Final Thoughts
Every option for accessing your home equity has benefits and trade-offs. A reverse mortgage may offer security and peace of mind to someone who values staying in their home and needs cash without monthly payments. But for others, alternatives like a HELOC or downsizing might offer better value or flexibility—depending on lifestyle, goals, and financial health.
Before choosing, consider:
- Do I need a lump sum or ongoing income?
- Can I manage monthly payments if required?
- Do I plan to stay in my home long-term?
- Is leaving an inheritance a priority?
Consulting with a mortgage broker or financial advisor can help you evaluate these options based on your unique situation. If you would like to get connected to a local Canadian mortgage broker feel free to fill in a quick form below.
