1. What is a reverse mortgage?
A reverse mortgage is a loan that allows Ontario homeowners aged 55 and older to borrow against the equity in their home without having to sell or make monthly payments. The loan is repaid when you move out, sell the home, or pass away.
2. Who qualifies for a reverse mortgage in Ontario?
To qualify, you must:
- Be at least 55 years old
- Own your home (it must be your primary residence)
- Have sufficient home equity
- Own a property that meets the lender’s guidelines (typically in an urban or suburban area)
3. How much can I borrow with a reverse mortgage?
You can borrow up to 55% of your home’s appraised value, depending on:
- Your age (older applicants qualify for more)
- Your home’s location and condition
- The type and value of your property
4. Do I have to make monthly payments?
No. One of the main features of a reverse mortgage is that monthly payments are not required. The interest is added to the loan balance and repaid when the home is sold or the homeowner passes away.
5. Will I still own my home?
Yes. You retain ownership of your home, and you can live in it for as long as you wish, as long as you continue to meet your obligations (property taxes, insurance, maintenance).
6. How is the loan repaid?
The loan is typically repaid from the proceeds of the sale of the home after:
- The last borrower passes away
- The home is sold
- The borrower moves into long-term care
7. Can I lose my home?
As long as you:
- Maintain the home
- Stay up to date on property taxes and insurance
- Continue to use the home as your primary residence
—you cannot be forced to leave due to the loan.
8. How does interest work on a reverse mortgage?
Interest compounds over time—meaning it accrues on both the original loan and the interest that builds up. This increases the total amount owed over time.
9. What are the interest rates like?
Interest rates for reverse mortgages are typically higher than traditional mortgage or HELOC rates. Rates can vary depending on the lender, the term you choose (e.g., fixed or variable), and market conditions.
10. Are reverse mortgage proceeds taxable?
No. The money you receive from a reverse mortgage is not considered taxable income and does not affect Old Age Security (OAS) payments. However, it may affect income-tested benefits like the Guaranteed Income Supplement (GIS) if not managed properly.
11. What are the costs or fees involved?
Common fees include:
- Home appraisal fee
- Legal fees (you must obtain independent legal advice)
- Administration/setup fees
These fees can often be deducted from the loan proceeds.
12. What if the loan ends up being more than my home is worth?
Reverse mortgages in Canada are non-recourse loans. This means you or your estate will never owe more than the fair market value of your home when it is sold.
13. How is a reverse mortgage different from a HELOC?
| Feature | Reverse Mortgage | HELOC |
|---|---|---|
| Payments | None required | Monthly interest payments required |
| Credit/income needed | No | Yes |
| Interest rate | Higher | Lower |
| Age requirement | 55+ | No age requirement |
14. Can I repay a reverse mortgage early?
Yes, you can repay it early. However, there may be prepayment penalties, especially within the first few years. Some exceptions apply in the case of death or moving into long-term care.
15. Should I talk to my family before getting one?
Yes. Because a reverse mortgage can affect your estate and inheritance plans, it’s wise to have an open conversation with your children or beneficiaries. It helps manage expectations and avoids surprises later.
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