How it works
How a reverse mortgage works—from the first question to the final repayment.
The product becomes easier to judge when you stop treating it as a single transaction and look at the whole timeline.
1. Define the purpose
Name the amount, timing and problem. Paying off a $120,000 mortgage is a different job from creating a $20,000 emergency reserve. Funding care is different from making an investment.
2. Establish the available range
Age, property value, location, property type, existing secured debt and lender underwriting shape the range. Qualification may treat income and credit differently from a conventional mortgage, but neither is ignored by definition.
3. Compare lender structures
- Initial and renewal pricing
- Lump-sum, scheduled and future advance options
- Voluntary payment and prepayment rules
- Portability and property criteria
- No-negative-equity protection and other lender terms
4. Complete appraisal, approval and legal work
The property is appraised and the file is underwritten. Independent legal advice is part of the process. Some straightforward files can fund in about seven days; roughly three weeks is a reasonable planning target; complex files can take six weeks or longer. Timing is never guaranteed.
5. Use the Payment Dial
| None | Some | All |
|---|---|---|
| No voluntary payment | Occasional or scheduled voluntary payments | Address more of the accruing interest, subject to terms |
No required payment is a feature. How you use it is a planning choice.
6. Renew, move, sell or settle
A rate term is a pricing period. It is not necessarily the maturity of the mortgage. A rate can renew without the mortgage ending.
Repayment is normally triggered by events defined in the contract, such as sale, a permanent move, or the death of the last qualifying borrower. The mortgage must be dealt with; selling is one common method, but not necessarily the only one.
Questions people ask next
Do I have to make monthly payments?
A lifetime reverse mortgage has no required monthly mortgage payment. Current lifetime products also permit voluntary payments under lender rules. The obligation is gone. The option isn’t.
Read the full explanation →How does reverse-mortgage interest compound?
All current Canadian lifetime reverse-mortgage lenders compound interest semi-annually. Interest that is not paid becomes part of the outstanding mortgage balance according to the lender’s terms, so future interest is calculated on a growing balance.
Read the full explanation →Can I reduce the principal?
Current lifetime products commonly permit an annual principal reduction, often up to 10% of outstanding principal, subject to lender and product terms. The 10% limit refers to permitted principal reduction—not necessarily the size of the cheque when accrued interest must be handled first.
Does the mortgage end when the rate term ends?
Not necessarily. A rate term is a pricing period; mortgage maturity is when the loan becomes due under its contract. A rate can renew without the mortgage ending.
Read the full explanation →Can I move with a reverse mortgage?
Most current lifetime products offer some form of portability, subject to conditions, property acceptance, timing and lender approval. If a move is reasonably foreseeable, portability belongs in the lender decision before signing.
Can the estate owe more than the home is worth?
Current Canadian lifetime reverse mortgages generally include lender-specific no-negative-equity protection, subject to mortgage terms and homeowner obligations. The mortgage must still be dealt with, but selling the home is one common method—not necessarily the only one.
Understand. Compare. Act.