How Does a Reverse Mortgage Work in Ontario?
A reverse mortgage lets an older homeowner borrow against the home while keeping ownership, and the loan grows until it comes due. It is usually for homeowners aged 55 or older and generally allows borrowing up to 55% of the home's current value.
You keep ownership of the home. Interest is added to the loan, so the balance grows rather than shrinks. The loan comes due when you sell, move out, the last borrower dies, or you default. Because the debt grows while the home stays yours, the equity left in the home usually shrinks the longer the loan runs, which matters if you hope to leave the home to family.
After the last borrower dies, the estate has a limited time to repay. Default, such as letting the home fall into disrepair, can lead to foreclosure. Costs and rates depend on the lender and your home, so compare written offers and ask a lawyer to review the paperwork before you sign. Getting independent legal advice before signing is sensible even where it is not required.
Key takeaways
- A reverse mortgage is usually for homeowners aged 55 or older and generally allows borrowing up to 55% of the home's current value.
- Interest is added to the loan, so the balance grows and the equity left in the home usually shrinks over time.
- The loan comes due when you sell, move out, the last borrower dies, or you default, and the estate has only a limited time to repay.
- Default, such as letting the home fall into disrepair, can lead to foreclosure, so read the terms and get legal advice before signing.