Reverse mortgage

What it is and how it works

A reverse mortgage is a loan secured by your home that lets homeowners 55+ turn part of their home equity into tax-free cash, with no regular payments until the home is sold, you move out, or the last borrower passes away.

• A loan secured against your home that lets homeowners aged 55+ access their equity without selling or moving.
• Unlike a traditional mortgage, you make no regular payments. Interest is added to the balance over time.
• You receive the money as a lump sum, scheduled advances, or both.
• Interest rate terms go up to five years and can be renewed (reset) at the end of each term.
• The amount you qualify for depends mainly on your age, your home’s appraised value, its location and its type.
• The older you are, the more you can generally borrow.
• Repayment is due when you sell, when the last borrower moves out permanently (for example to long-term care), or when the last borrower passes away.

Estimate your amount with the calculator

Advantages

• You stay the ownerYou keep full ownership of your home.
• Stay homeStay in the home you love; no need to sell or move.
• No paymentsNo regular payments until you sell or move.
• Tax-freeFunds are tax-free because they’re a loan, not income.
• Never owe more than the homeNo negative equity guarantee: you’ll never owe more than your home’s fair market value, as long as you meet your obligations.
• Flexible useUse the money however you choose.
• Flexible payoutLump sum, scheduled advances, or both.
• Easier qualifyingNo minimum credit score and lower income criteria than a home equity line of credit.
• Keep the growthIf your home gains value, the gains are yours.
• Optional paymentsYou can pay interest monthly to keep the balance from growing.
• Choice of rateFixed terms (6 months to 5 years) or variable.
• Offers comparedAs brokers, we compare reverse mortgage offers from several lenders to find the best fit.
• One contactWe handle your application from start to finish, and you have one person to talk to.

Note: interest compounds and is added to the loan balance, so your remaining home equity decreases over time. The calculator lets you see this effect over 15 years.

See the projection in the calculator

Requirements and eligibility

You qualify mainly based on age, home value and location, not income or credit score.

Age

The youngest homeowner must be 55 or older. Homeowners 70+ may access a higher amount.

Residence

The home must be your primary residence (lived in at least six months a year).

Home value

Minimum appraised value of $250,000.

Location

Available in most cities and towns in Québec.

Property type

Detached, semi-detached, townhouses, condos, duplex to quadruplex; mobile homes possible under conditions.

Existing mortgage

Allowed, but it must be paid off with the reverse mortgage funds (the reverse mortgage must be registered in first rank).

Enough equity

The reverse mortgage amount must cover all loans secured by the home.

Credit

No minimum credit score; credit is reviewed but the lender looks at your whole financial history.

Legal advice

Independent legal advice is mandatory, including for a non-titled spouse.

Power of attorney

A power of attorney may be used if it covers real property.

Your ongoing obligations

Pay property taxes on time, keep home insurance in force, maintain the property, and pay condo fees if applicable.

Documents typically requested

• two pieces of ID;
• proof the home is your primary residence;
• home insurance details;
• statements for any existing mortgage;
• proof property taxes are up to date.

A lender may hold back part of the funds to cover needed repairs or tax/condo arrears.

What you can do with the funds

There are no restrictions on use once any existing mortgage or secured debt is paid off.

• Pay off your mortgagePay off an existing mortgage and eliminate monthly payments.
• Consolidate debtConsolidate high-interest debt, pay off credit cards or loans.
• RenovateFund repairs or renovations, or adapt your home for retirement.
• Supplement your incomeTop up retirement income and cover day-to-day expenses.
• Health and carePay for in-home care, medical expenses or long-term care costs.
• Help your familyHelp children or grandchildren buy their first home or start a business.
• Living inheritanceGive a living inheritance and see your loved ones enjoy it.
• Travel and hobbiesTravel, take up new hobbies, pursue personal goals.
• EmergenciesAbsorb unexpected expenses.

Ways to receive the funds

Three advance types exist and can be combined; the initial advance is at least $25,000.

1. Lump sum (initial advance)

   Take all your funds upfront in one advance. Lump-sum-only products may offer lower rates.

   Minimum $25,000; fixed or variable rate

2. Scheduled advances

   Receive money regularly on a set schedule: monthly, quarterly, semi-annually or annually.

   Amount and frequency set to your needs; usually variable rate only

3. Ad hoc advances

   Keep part of your approved amount and draw it later when you need it.

   Drawn when you need them, up to your approved amount

Interest is charged only on money actually advanced, so taking funds gradually keeps costs lower.

Costs, rates, prepayment and repayment

Reverse mortgage rates are higher than regular mortgage rates because no payments are made; the main one-time costs are a set-up fee, appraisal and legal advice.

Rates

Fixed terms of 6 months, 1, 2, 3 or 5 years, or a variable rate tied to the lender’s prime rate. Higher than conventional rates because no payments are required.

Set-up fee

A one-time set-up fee applies, deducted from the first advance rather than paid out of pocket.

Appraisal

Paid to an independent appraiser.

Legal advice

Independent legal advice from a lawyer or notary of your choice.

Compounding

Interest is charged daily and compounded (semi-annually for fixed, monthly for variable) on the outstanding balance.

Prepayment

Here, as an example, are one lender’s terms (they vary by lender and by application): interest can be prepaid once a month; up to 10% of the principal can be repaid once a year without charge. For a full repayment, prepayment charges of 5, 4, then 3 months’ interest apply in years 1 to 3, 3 months’ interest in years 4 to 10, and none from year 11. Payments go first to fees, then interest, then principal.

The no negative equity guarantee

If the home sells for less than what’s owed, the lender covers the difference. Conditions: taxes, insurance and maintenance must be kept up. The guarantee excludes fees and interest after the due date.

At the due date

You then owe the principal, accrued interest, fees, and any prepayment charge. Everything left after repayment belongs to you or your estate.

The application process

The process runs in five steps, and we lead the first two.

1. Free estimate and consultation. We review your goals and options together.
2. Your application. We complete and submit your application to the lender best suited to your situation.
3. The appraisal. An independent appraiser confirms your home’s value.
4. Legal advice and signing. You get independent legal advice from a lawyer or notary, then sign your reverse mortgage documents at the notary’s office.
5. Funding. Funds are released; any existing mortgage is paid off first.

The independent legal advice step confirms that you understand the terms, are of sound mind, and aren’t being pressured to sign. A reassuring protection, for you and your loved ones.

Frequently asked questions

Have another question? Contact us.