Reverse Mortgage Alternatives

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

OptionMonthly PaymentsAccess to EquityCredit/Income RequiredKey AdvantageKey Risk/Cost
Reverse MortgageNoUp to 55%NoNo payments requiredCompounding interest, estate impact
HELOCYes (interest only)Up to 65%YesFlexible, low-cost borrowingMust repay monthly, credit risk
Mortgage RefinanceYesUp to 80%YesLarge lump sum, lower interestLong-term payments, penalties
DownsizingNoUp to 100%NoFull access to equity, no debtEmotional cost of moving
Renting Out Home SpaceNo (income-generating)None (cash flow)NoMonthly incomePrivacy, landlord responsibilities
Gov’t Support ProgramsNoN/AIncome-basedFree financial supportLimited 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.

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Ksenia Bichek

I'm a licensed Ontario mortgage agent & realtor, and Lead Writer at FinanceVine. I create educational content about mortgage, real estate, and insurance. Reach me at: [email protected].