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

Unsure About the Housing Market? Let's Talk.

By Bill Fraser • September 16, 2025
If you’ve been thinking about buying a property, whether that be your first home, next home, forever home, or a home to retire into, the current state of the Canadian economy might have you wondering: Is this really the right time to make a move? There is certainly no shortage of doom and gloom in the news out there. The truth is, that’s a tough question to answer in the best of times. It’s nearly impossible to know for sure what’s going to happen next with the housing market in Canada. It could heat up or it could cool down. So here’s some advice. Instead of basing your buying decision entirely on external market factors, like the economy or housing market, consider looking for the answers internally. When you stop looking at the market to determine your timing to buy a home, and instead examine the personal reasons you have for wanting to buy a home, the picture can become much clearer. Here are some questions to consider. Although they are subjective, they will help bring you clarity. Ask yourself: Does buying a property now put me in a better financial position? Do I make enough money now to afford a new home and maintain my lifestyle? Do I feel confident with my current employment status? Have I saved enough money for a down payment? How long do I plan on living in this new home? Is there any scenario where I might have to sell quickly and potentially lose money? Does buying a property now move me closer to my life goals? Do I really want to buy now or am I just feeling a lot of pressure to just buy something? Am I holding back because I'm scared property prices might drop soon? There’s no doubt that buying a home can be stressful, but it doesn’t have to be. Having a plan in place is the best course of action to help you make good decisions and alleviate that stress. If you’d like to have a conversation to discuss your plans, ask some questions, and map out what buying a home looks like for you, we can address many of the unknowns together. The best place to start is to work through a mortgage pre-approval. There is no cost for this service, you’ll learn exactly what you can qualify for, and it will provide a lot of clarity about your situation. You might decide that it’s best to wait before buying, and that’s just fine. You might find that now’s a perfect time for you to buy! If you'd like to talk, please connect anytime. You’re not in this alone. We can work through everything together.

Start Smart: Get Pre-Approved for Your Mortgage

By Bill Fraser • September 2, 2025
Thinking of Buying a Home? Here’s Why Getting Pre-Approved Is Key If you’re ready to buy a home but aren’t sure where to begin, the answer is simple: start with a pre-approval. It’s one of the most important first steps in your home-buying journey—and here's why. Why a Pre-Approval is Crucial Imagine walking into a restaurant, hungry and excited to order, but unsure if your credit card will cover the bill. It’s the same situation with buying a home. You can browse listings online all day, but until you know how much you can afford, you’re just window shopping. Getting pre-approved for a mortgage is like finding out the price range you can comfortably shop within before you start looking at homes with a real estate agent. It sets you up for success and saves you from wasting time on properties that might be out of reach. What Exactly is a Pre-Approval? A pre-approval isn’t a guarantee. It’s not a promise that a lender will give you a mortgage no matter what happens with your finances. It’s more like a preview of your financial health, giving you a clear idea of how much you can borrow, based on the information you provide at the time. Think of it as a roadmap. After going through the pre-approval process, you’ll have a much clearer picture of what you can afford and what you need to do to make the final approval process smoother. What Happens During the Pre-Approval Process? When you apply for a pre-approval, lenders will look at a few key areas: Your income Your credit history Your assets and liabilities The property you’re interested in This comprehensive review will uncover any potential hurdles that could prevent you from securing financing later on. The earlier you identify these challenges, the better. Potential Issues a Pre-Approval Can Reveal Even if you feel confident that your finances are in good shape, a pre-approval might uncover issues you didn’t expect: Recent job changes or probation periods An income that’s heavily commission-based or reliant on extra shifts Errors or collections on your credit report Lack of a well-established credit history Insufficient funds saved for a down payment Existing debt reducing your qualification amount Any other financial blind spots you might not be aware of By addressing these issues early, you give yourself the best chance of securing the mortgage you need. A pre-approval makes sure there are no surprises along the way. Pre-Approval vs. Pre-Qualification: What’s the Difference? It’s important to understand that a pre-approval is more than just a quick online estimate. Unlike pre-qualification—which can sometimes be based on limited information and calculations—a pre-approval involves a thorough review of your finances. This includes looking at your credit report, providing detailed documents, and having a conversation with a mortgage professional about your options. Why Get Pre-Approved Now? The best time to secure a pre-approval is as soon as possible. The process is free and carries no risk—it just gives you a clear path forward. It’s never too early to start, and by doing so, you’ll be in a much stronger position when you're ready to make an offer on your dream home. Let’s Make Your Home Buying Journey Smooth A well-planned mortgage process can make all the difference in securing your home. If you’re ready to get pre-approved or just want to chat about your options, I’d love to help. Let’s make your home-buying experience a smooth and successful one!