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A reverse mortgage is a loan available to eligible senior homeowners that converts home equity into cash without required regular payments, with the loan plus accumulated interest repaid when the home is sold, the borrower moves out, or the last borrower passes away.
Because payments are optional rather than required, unpaid interest is added to the loan balance each period, so the amount owed grows over time while the homeowner's remaining equity shrinks — the opposite of an amortizing mortgage or a HELOC, where the borrower actively controls how much is drawn and repaid.
Canadian reverse mortgages are generally structured so the amount owed will not exceed the fair market value of the home at the time it is repaid, protecting the estate from owing more than the property is worth. Lenders typically require an appraisal to establish how much can be advanced and independent legal advice before the loan closes; homeowners considering one often compare it against a HELOC or a refinance that requires regular payments.
Offered by specific lenders: reverse mortgages in Canada are provided through a small number of lenders that specialize in this senior-homeowner product.
No required monthly payments: interest accrues and is added to the balance instead of being paid down, so the loan grows and available equity shrinks over time.
Appraisal and legal advice required: lenders require a current appraisal to set the available amount, and independent legal advice is standard before closing.
Structured to protect the estate: the amount owed is generally capped at the home's fair market value at repayment, so heirs are not left owing more than the property's worth.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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