As home values in Ontario continue to rise, many older homeowners are exploring ways to unlock the equity in their homes. One increasingly popular solution is the reverse mortgage. But before diving in, it’s crucial to understand how reverse mortgage rates work and how they compare to traditional borrowing options.
What Is a Reverse Mortgage?
A reverse mortgage is a loan available to Canadian homeowners aged 55 and over that allows them to borrow against their home equity without having to sell the property or make monthly mortgage payments. The loan is repaid when the homeowner sells the home, moves out, or passes away.
Current Reverse Mortgage Rates in Ontario (As of 2025)
Reverse mortgage interest rates tend to be higher than conventional mortgage rates, due to the increased risk to lenders and the deferred repayment structure.
Here’s a general snapshot of reverse mortgage rates in Ontario:
| Term | Type | Estimated Rate |
|---|---|---|
| 1-Year | Fixed | 7.24% – 7.59% |
| 3-Year | Fixed | 7.34% – 7.69% |
| 5-Year | Fixed | 7.39% – 7.79% |
| Variable Rate Option | Variable | Prime + 2.5% (approx.) |
📌 Note: Rates vary based on the lender, the borrower’s age, location, and the appraised value of the home and may chance at any time without notice.
How Rates Are Determined
Reverse mortgage rates are influenced by:
- Bank of Canada’s interest rate trends
- Lender risk premiums
- Borrower-specific factors such as age, home location, and appraised value
- Loan type and term (fixed vs. variable)
Example: How Interest Accrues
Unlike regular mortgages, reverse mortgages accumulate interest over time. For example, a $200,000 reverse mortgage at 7.5% could grow to over $280,000 after 5 years, depending on repayment terms and interest compounding.
Pros and Cons of Current Rates
Pros:
- Access tax-free cash without monthly payments
- Enjoy your home while leveraging its value
- Rates are competitive within the reverse mortgage market
Cons:
- Higher interest than traditional mortgages or HELOCs
- Reduces your estate value over time
- Compounding interest can add up quickly
Alternatives to Consider
If you qualify, consider alternatives such as:
- Home Equity Line of Credit (HELOC) – lower interest but requires monthly payments
- Downsizing – sell your home and buy a smaller one
- Refinancing your current mortgage
Should You Get a Reverse Mortgage?
A reverse mortgage can be a smart solution if:
- You need access to funds for retirement, medical costs, or home renovations
- You want to age in place
- You have no plans to leave the full home value to heirs
Always consult with a licensed mortgage broker to determine if this is the right option based on your financial goals. If you would like to get connected to a local mortgage agent fill in a quick form below.
