How Does a Reverse Mortgage Work for Canadian Seniors

Bill Fraser • July 9, 2018

Living well in retirement isn’t as easy as most people envision when they’re in their youth. Utilities, medical payments, prescriptions, insurance and just day-to-day living expenses often increase more rapidly than pensions, dividends and interest income. Even when you own your home, making ends meet at the end of the month can be a challenge for seniors. That’s where a reverse mortgage can help many Canadian seniors aged 55 and older.

What Is A Reverse Mortgage?

  • How does a reverse mortgage work?
  • How can I qualify for a reverse mortgage?
  • What is a reverse mortgage?

These are just some of the questions that can arise while considering a reverse mortgage. A reverse mortgage is a financial product that allows Canadian seniors (age 55 and older) to tap into the equity that they’ve accumulated in their home. For many people, that equity is their largest single asset. Homeowners can access only up to 55 percent of their home equity as reverse mortgage, as long as they remain in that home. The exact amount a homeowner will receive depends on the property type, location, the home’s value, and the age of the applicant(s).

To qualify for a reverse mortgage in Canada, homeowners must use the residence as their primary home, maintain the property is good standing, stay up to date with insurance, continue to pay property tax and pay off any outstanding debts secured with the home with the proceeds from the CHIP Reverse Mortgage. Unlike other mortgages and loans, there is no health check or minimum income required with a reverse mortgage.

You will never be forced to sell or move as a result of changing home values or earning. The amount that you or your estate eventually has to repay will never exceed the fair market value of your home at the time it is sold. There’s no reason your home should ever be a burden to you or your family. The loan will be recalled only if the last homeowner passes away or moves out of the home.

Using Reverse Mortgage Funds Wisely

There are almost no conditions on how you use the proceeds of a reverse mortgage loan and homeowners are not required to make payment towards the interest or principal of the loan. This is often not the case with other types of loans or mortgages such as a Home Equity Line of Credit, or HELOC, that requires regular payments. Just a few of the smart ways how Canadian seniors can use reverse mortgage funds include:

  • Make improvements to your home.

Keeping up with your home’s maintenance is essential to having a safe and secure living environment. If you’ve had to put off things like replacing your roof or replacing your heating system, the funds from your reverse mortgage loans can help make these essential updates possible. Canadian seniors can also use their loan proceeds for other upgrades, such as adding a deck, replacing countertops and/or remodeling the kitchen.

  • Pay down debt.

High interest rates from credit cards can make it tough to ever get fully out of debt. You can get rid of some of your monthly bills by using your reverse mortgage funds to pay off those high credit card balances.


  • Pay off medical bills.

If a recent illness has wiped out your savings and left you with a pile of bills, a reverse mortgage can give you the funds to pay off all of those bills and allow you to sleep better at night.

  • Pay for leisure activities.

You can use your reverse mortgage to engage in leisure activities in retirement or enhance your lifestyle. This could include travel to various destinations – local or abroad or indulge in favorite hobbies, which may require monetary investment.

If you choose to take out a reverse mortgage loan, you keep the deed to the property. You only have to give up ownership of the house if/when you move out or sell the property. You can stay as long as you stay current on your taxes, maintenance and insurance. There’s no maximum length of time that you can live there.

Advantages Of A Reverse Mortgage Loan

A reverse mortgage loan offers a number of advantages to Canadian seniors. First, the funds you receive are completely tax-free. In addition, you can use the money any way you choose; pay off bills, remodel the house, or take a much needed vacation. Lastly, there are no payments required!

Applying For A Reverse Mortgage Loan

Canadian seniors can apply for a reverse mortgage loan from HomEquity Bank, the only provider of the CHIP Reverse Mortgage.

In order to qualify…

  • You (and your spouse) must be 55 or older

  • You must use the property as your primary residence

  • The balance of any existing mortgage or lien against the property must be paid off by the proceeds from the reverse mortgage (or by other funds before the reverse mortgage is taken)

  • Your home is in a location and of a type that HomEquity Bank typically lends on

CHIP Reserve Mortgages

Reverse mortgages for Canadian seniors are a little different from reverse mortgage products sold in the United States. All reverse mortgages in Canada are provided by HomEquity Bank, a Canadian Schedule 1 bank. The CHIP Reverse Mortgage has been assisting seniors for more than 25 years. Homeowners can get the proceeds from a reverse mortgage loan in a lump sum or in periodic advances. A reverse mortgage can be one of the choices for Canadian seniors looking for a way to supplement their monthly income. This financial product can help you get rid of debt, make necessary improvements to your home, or assist with day-to-day expenses. If you are a Canadian homeowner, age 55 or over, contact me today.


This article is the property of HomEquity Bank and has been published with permission.

BILL FRASER
OWNER / MORTGAGE EXPERT

BOOK AN APPOINTMENT CONTACT ME
RECENT POSTS

How to Raise Your Credit Score and Unlock Better Rates

By Bill Fraser • January 20, 2026
Want a Better Credit Score? Here’s What Actually Works Your credit score plays a major role in your ability to qualify for a mortgage—and it directly affects the interest rates and products you’ll be offered. If your goal is to access the best mortgage options on the market, improving your credit is one of the smartest financial moves you can make. Here’s a breakdown of what truly matters—and what you can start doing today to build and maintain a strong credit profile. 1. Always Pay On Time Late payments are the fastest way to damage your credit score—and on-time payments are the most powerful way to boost it. When you borrow money, whether it’s a credit card, car loan, or mortgage, you agree to repay it on a schedule. If you stick to that agreement, lenders reward you with good credit. But if you fall behind, missed payments are reported to credit bureaus and your score takes a hit. A single missed payment over 30 days late can hurt your score. Missed payments beyond 120 days may go to collections—and collections stay on your report for up to six years . Quick tip: Lenders typically report missed payments only if they’re more than 30 days overdue. So if you miss a Friday payment and make it up on Monday, you're probably in the clear—but don't make it a habit. 2. Avoid Taking On Unnecessary Credit Once you have at least two active credit accounts (like a credit card and a car loan), it’s best to pause on applying for more—unless you truly need it. Every time a lender checks your credit, a “hard inquiry” appears on your report. Too many inquiries in a short time can bring your score down slightly. Better idea? If your current lender offers a credit limit increase , take it. Higher available credit (when used responsibly) actually improves your credit utilization ratio, which we’ll get into next. 3. Keep Credit Usage Low How much of your available credit you actually use—also known as credit utilization —is another major factor in your score. Here’s the sweet spot: Aim to use 15–25% of your limit if possible. Never exceed 60% , especially if you plan to apply for a mortgage soon. So, if your credit card limit is $5,000, try to keep your balance under $1,250—and pay it off in full each month. Maxing out your cards or carrying high balances (even if you make the minimum payment) can tank your score. 4. Monitor Your Credit Report About 1 in 5 credit reports contain errors. That’s not a small number—and even a minor mistake could cost you when it’s time to get approved for a mortgage. Check your report at least once a year (or sign up for a monitoring service). Look for: Incorrect balances Accounts you don’t recognize Missed payments you know were paid You can request reports directly from Equifax and TransUnion , Canada’s two national credit bureaus. If something looks off, dispute it right away. 5. Deal with Collections Fast If you spot an account in collections—don’t ignore it. Even small unpaid bills (a leftover phone bill, a missed utility payment) can drag down your score for years. Reach out to the creditor or collection agency and arrange payment as quickly as possible . Once settled, ask for written confirmation and ensure it’s updated on your credit report. 6. Use Your Credit—Don’t Just Hold It Credit cards won’t help your score if you’re not using them. Inactive cards may not report consistently to the credit bureaus—or worse, may be closed due to inactivity. Use your cards at least once every three months. Many people put routine expenses like groceries or gas on their cards and pay them off right away. It’s a simple way to show regular, responsible use. In Summary: Improving your credit score isn’t complicated, but it does take consistency: Pay everything on time Keep balances low Limit new credit applications Monitor your report and handle issues quickly Use your credit regularly Following these principles will steadily increase your creditworthiness—and bring you closer to qualifying for the best mortgage rates available. Ready to review your credit in more detail or start prepping for a mortgage? I’m here to help—reach out anytime!

Don’t Let Collections Derail Your Mortgage Application

By Bill Fraser • January 13, 2026
Can You Get a Mortgage If You Have Collections on Your Credit Report? Short answer? Not easily. Long answer? It depends—and it’s more common (and fixable) than you might think. When it comes to applying for a mortgage, your credit report tells lenders a story. Collections—debts that have been passed to a collection agency because they weren’t paid on time—are big red flags in that story. Regardless of how or why they got there, open collections are going to hurt your chances of getting approved. Let’s break this down. What Exactly Is a Collection? A collection appears on your credit report when a bill goes unpaid for long enough that the lender decides to stop chasing you—and hires a collection agency to do it instead. It doesn’t matter whether it was an unpaid phone bill, a forgotten credit card, or a disputed fine: to a lender, it signals risk. And lenders don’t like risk. Why It Matters to Mortgage Lenders? Lenders use your credit report to gauge how trustworthy you are with borrowed money. If they see you haven’t paid a past debt, especially recently, it suggests you might do the same with a new mortgage—and that’s enough to get your application denied. Even small collections can cause problems. A $32 unpaid utility bill might seem insignificant to you, but to a lender, it’s a red flag waving loudly. But What If I Didn’t Know About the Collection? It happens all the time. You move provinces and miss a final utility charge. Your cell provider sends a bill to an old address. Or maybe the collection is showing in error—credit reports aren’t perfect, and mistakes do happen. Regardless of the reason, the responsibility to resolve it still falls on you. Even if it’s an honest oversight or an error, lenders will expect you to clear it up or prove it’s been paid. And What If I Chose Not to Pay It? Some people intentionally leave certain collections unpaid—maybe they disagree with a charge, or feel a fine is unfair. Here are a few common “moral stand” collections: Disputed phone bills COVID-related fines Traffic tickets Unpaid spousal or child support While you might feel justified, lenders don’t take sides. They’re not interested in why a collection exists—only that it hasn’t been dealt with. And if it’s still active, that could be enough to derail your mortgage application. How Can You Find Out What’s On Your Report? Easy. You can check it yourself through services like Equifax or TransUnion, or you can work with a mortgage advisor to go through a full pre-approval. A pre-approval will quickly uncover any credit issues, including collections—giving you a chance to fix them before you apply for a mortgage. What To Do If You Have Collections Verify: Make sure the collection is accurate. Pay or Dispute: Settle the debt or begin a dispute process if it’s an error. Get Proof: Even if your credit report hasn’t updated yet, documentation showing the debt is paid can be enough for some lenders. Work With a Pro: A mortgage advisor can help you build a strategy and connect you with lenders who offer flexible solutions. Collections are common, but they can absolutely block your path to mortgage financing. Whether you knew about them or not, the best approach is to take action early. If you’d like to find out where you stand—or need help navigating your credit report—I’d be happy to help. Let’s make sure your next mortgage application has the best possible chance of approval.