Reverse mortgage estimator
CHIP-style reverse mortgages let homeowners 55+ tap home equity without monthly payments. Interest compounds onto the balance — see the long-run impact.
Your scenario
Result
No regular payments — interest compounds. The lender is repaid when you sell, move out, or pass on. Estimate only; actual terms vary by lender.
What a reverse mortgage actually is in Canada
A reverse mortgage is a loan secured against your home that lets homeowners aged 55+ tap home equity without making monthly payments. The two providers in Canada — HomeEquity Bank (CHIP) and Equitable Bank — both work the same way: interest compounds onto the balance, and the loan is repaid when you sell, move out, or pass away.
How much you can borrow
The maximum loan-to-value depends primarily on the youngest borrower's age, then on home value, location, and home type. Typical caps:
- Age 55–59: ~25% of home value
- Age 60–64: ~33%
- Age 65–69: ~40%
- Age 70–74: ~45%
- Age 75–79: ~52%
- Age 80+: ~55%
Major Canadian cities and detached homes tend to push the LTV higher within these ranges; rural condos pull it lower.
The compounding trap — and the cap
Because no payments are made, interest is added to the loan balance every month. At a typical 8.5% rate, a $300,000 reverse mortgage balloons to roughly $680,000 after 10 years and $1.5 million after 20. The legal protection: by law, you (or your estate) can never owe more than the home is worth at the time of repayment — called the no negative equity guarantee.
When a reverse mortgage makes sense
- You want to age in place but cash flow is tight (fixed-income retirement)
- You'd rather not sell the family home or downsize
- You need a lump sum for a renovation, medical cost, or to help a child buy
- You have substantial equity but limited investments to draw on
When it doesn't
- You plan to move within 3–5 years (closing costs + setup fees take that long to amortize)
- You could refinance into a regular HELOC instead (lower rate, more flexibility — see HELOC calculator)
- Leaving the home to heirs is a high priority and compounding will consume most of the equity
- You qualify for a regular mortgage and could service the payments
Costs to budget for
- Setup / appraisal: $1,500–$2,500
- Independent legal advice (required): $400–$700
- Higher interest rate than a regular mortgage — typically 1–3% above conventional rates
- Discharge fee at exit: $300–$600 (waived in some cases)