Reverse Mortgage in Canada (2026): The CHIP Program, Honestly

Reverse mortgages are heavily marketed to Canadian seniors — you’ve probably seen the CHIP commercials. The pitch (“unlock your home’s equity tax-free, no monthly payments”) sounds appealing, but the details matter. Here’s the honest breakdown of when they help and when they hurt.

What a reverse mortgage actually is

A reverse mortgage is a loan secured by your home. The lender gives you a lump sum, a stream of payments, or a line of credit. You don’t make monthly payments — interest accrues against the loan balance. When you sell the home, move out for 12+ months, or die, the lender is repaid from the sale proceeds. Any equity remaining goes to you or your estate.

The catch: interest compounds against the growing balance for years. Over a 15-20 year holding period, that compounding can eat 50-80% of your home’s equity.

The two Canadian providers

• CHIP Reverse Mortgage (HomeEquity Bank) — The market leader. Available to homeowners 55+. Borrow up to 55% of your home’s appraised value.
• Equitable Bank Reverse Mortgage — Newer, more competitive on rates. Available to homeowners 55+. Borrow up to 55% of value.

Both are CDIC-affiliated lenders. Both are regulated under federal banking laws. Both have similar structures. The differences come down to rates + fees, which you should compare directly.

The 2026 cost structure

• Interest rates: 7-9% in 2026 (variable or 1-5 year fixed). Roughly 2-3% above standard mortgage rates because the lender is taking on long-duration credit risk with no monthly payments.
• Setup fees: $1,500-$3,000 (appraisal $400-600, legal $500-1,500, lender setup fee $0-$1,800).
• Closing costs: Title insurance, legal review, etc. — typically $500-$1,000.
• Prepayment penalty: If you pay back early, expect 3-month interest penalty or interest-rate-differential calculation, similar to a regular mortgage.

How much can you actually borrow?

Maximum loan amount = 55% of home value, but the actual amount you qualify for depends on:

• Your age (or younger spouse’s age): Older = higher % allowed. A 55-year-old might be limited to 15-20% of value. A 75-year-old can typically borrow closer to 40-50%.
• Property type: Detached homes in major cities qualify for higher amounts than rural properties or condos.
• Home condition + appraised value
• Existing mortgage: Any existing mortgage must be paid off from the reverse mortgage proceeds first.

The compounding problem (real example)

Borrow $200,000 at age 65 on an $800,000 home at 8% interest. No monthly payments. By age 80 (15 years later), the loan balance has grown to roughly $634,000 — more than 3x the original amount. If the home appreciated at 3%/year, it’s now worth $1,247,000. Net equity remaining: $613,000.

By age 85 (20 years), the loan is $940,000. Home value at 3% growth is $1,445,000. Remaining equity: $505,000.

This isn’t necessarily bad — you got use of $200K when you needed it, and you still have $500K+ for your estate. But over 20 years, you’ve effectively paid $740K in compounded interest for that initial $200K borrowing. The same money invested at 6% return would have grown to $640K.

When a reverse mortgage actually makes sense

• House-rich, cash-poor seniors who want to age in place. If your home is worth $800K but your retirement income is $30K/year and you need $200K to pay for in-home care or a home renovation that lets you stay independent, the reverse mortgage may be cheaper than selling + moving + renting.
• Seniors with no heirs (or heirs who don’t want the house). If you don’t care about leaving the home as an inheritance, reverse mortgages let you turn equity into income while you’re alive.
• Bridging until selling makes sense. Down market and you need cash NOW? A reverse mortgage can bridge 1-3 years until you can sell the home into a better market.
• Paying off existing debt with no income to qualify for refinancing. If you have a $150K HELOC at 9% and no income to refinance, replacing it with a reverse mortgage at 8% eliminates monthly payments and lowers your effective rate.

When a reverse mortgage is a bad idea

• You could sell the house and downsize. If selling + moving to a smaller place gives you the cash without the 8% compounding interest, that’s almost always the better trade.
• You have other lower-cost borrowing options. A HELOC at 6% is cheaper than a reverse mortgage at 8% IF you can make the interest payments. Reverse mortgages exist for people who can’t.
• You want to leave the home to your kids. The compounded interest will significantly erode their inheritance.
• You’re under 70 and have lots of years ahead. The longer you hold a reverse mortgage, the worse the compounding gets. Best when you expect to use the money for <10 years.
• You don’t fully understand the terms. Reverse mortgage contracts are complex. If you can’t explain the math to a friend clearly, don’t sign.

Things to verify before signing

• No Negative Equity Guarantee: Both CHIP and Equitable Bank guarantee you (or your estate) will never owe more than the home is worth at sale. Make sure this is in writing.
• Estate-friendly repayment timing: Estate must typically repay within 6-12 months of death. Confirm the window so heirs can sell properly.
• Spouse protections: If only one spouse is on the reverse mortgage, the other may have to vacate when the borrower dies. Add younger spouse if you want both protected.
• Rate type: Variable rate is cheaper today but exposes you to rising rates. Fixed for 5 years gives certainty at a higher start rate.

An honest alternative: downsizing

A friend’s parents who arrived from Vietnam in 1985 owned a paid-off home in suburban Toronto worth $1.1M but lived on $35K/year CPP+OAS combined. CHIP pitched them a $250K reverse mortgage. We ran the numbers: selling the house, buying a $650K condo nearby, and pocketing $400K freed up far more lifetime cash than the reverse mortgage, with no compounding interest. They downsized. Six years later they’re financially comfortable and have $300K+ still in reserve for healthcare needs. Sometimes the right answer isn’t a clever financial product — it’s a different lifestyle decision.