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As more Canadian homeowners reach retirement age, many are looking for ways to tap into the value of their homes without having to sell or downsize. One option that often comes up is a reverse mortgage. But while reverse mortgages are growing in popularity, they’re also surrounded by a lot of confusion—and even some fear. Are they scams? Will you lose your home? Are they safe for seniors?

Let’s break it all down in plain English so you can decide if a reverse mortgage is right for you or a loved one.

Are Reverse Mortgages a Scam?

Let’s start with the big question: The short answer is no, not when they’re offered by legitimate, regulated lenders.

In Canada, reverse mortgages are legal financial products. The most well-known provider is HomeEquity Bank, which offers the CHIP Reverse Mortgage. This product has been around for over 35 years and is federally regulated.

The idea behind a reverse mortgage is simple:

If you're 55 or older and own your home, you can borrow money against the equity in your home—but instead of making monthly payments like a regular mortgage, the loan is paid off when you sell the home, move out, or pass away.

Scam concerns usually come from:

A lack of understanding about how reverse mortgages work

Aggressive sales tactics in some cases (usually outside Canada)

Worry about high interest rates or shrinking equity

However, as long as you’re dealing with a reputable mortgage broker and lender and you understand the terms, a reverse mortgage is not a scam—it’s simply a specialized financial tool.

Are Reverse Mortgages Regulated in Canada?

Yes, reverse mortgages are regulated under Canadian federal law, just like any other mortgage product.

The main provider, HomeEquity Bank, is a Schedule I bank, which means it's subject to oversight by the Office of the Superintendent of Financial Institutions (OSFI). This ensures that reverse mortgages follow rules designed to protect Canadian homeowners.

There are also disclosure requirements:

Lenders must explain all terms clearly

Borrowers must be given time to review the contract

Legal advice is often encouraged—or even required—before signing

In short, Canada has built-in protections to ensure that seniors are not being misled or rushed into a reverse mortgage without understanding what they’re signing.

Are Reverse Mortgages Safe for Seniors in Canada?

Yes, reverse mortgages can be safe for seniors—but like any financial product, they need to be used wisely.

In Canada, reverse mortgages are regulated by the federal government, and lenders like HomeEquity Bank are required to follow strict rules. These include:

Making sure you fully understand the terms before you sign

Limiting how much you can borrow (up to 55% of your home’s value)

Guaranteeing that you’ll never owe more than your home is worth, even if the housing market drops

For many seniors, reverse mortgages can offer:

A reliable source of income in retirement

A way to stay in their home longer

Peace of mind knowing they won’t have to make monthly payments

Still, it’s important to talk to a financial advisor or mortgage broker to see if it’s the right fit for your situation.

Why Do People Say Reverse Mortgages Are Bad?

While there have been cases of consumers being taken advantage of in the U.S., Canada has strong rules and regulations in place that effectively protect the rights of reverse mortgage borrowers.

Here are a few common reasons people criticize reverse mortgages:

They reduce the value of your estate for your heirs.

Since the loan is repaid from the sale of your home, your heirs may inherit less.

Interest builds up over time.

Because you don’t make payments, interest is added to the loan balance every month. Over time, this can add up.

People fear losing control of their home.

Some worry that the lender can take the home away—but that’s not how it works in Canada. You stay on title and continue to own your home.

Fees and closing costs can be higher than a traditional mortgage.

There may be setup fees, legal fees, and other charges. These are usually minimal and are deducted from the loan amount.

It’s also worth noting that reverse mortgages aren’t for everyone. If you plan to move soon, need a large lump sum, or want to leave your home to your kids mortgage-free, this may not be the best choice.

But in the right situations, especially for seniors on a fixed income with a lot of equity in their home, it can be a practical solution.

Do You Lose Your Home with a Reverse Mortgage?

No, you don’t lose your home when you take out a reverse mortgage. In fact, one of the biggest advantages is that you get to stay in your home for as long as you want, provided:

You keep up with property taxes

You maintain the home in good condition

You keep it insured

You remain the legal owner of your home. The lender simply puts a lien on the title—just like a traditional mortgage.

The loan is only repaid when:

You sell the home

You move out permanently (e.g., into long-term care)

Or when the last borrower passes away

At that point, the home is usually sold, and the loan (plus interest) is repaid from the proceeds. Any leftover money goes to your estate or your beneficiaries.

Can You Be Forced to Sell Your Home?

This is one of the biggest fears people have—and fortunately, the answer is no, you cannot be forced to sell your home just because you have a reverse mortgage.

As long as you continue to:

Live in your home as your primary residence

Pay your property taxes and keep the home insured

Maintain the property in reasonable condition

… you have the legal right to stay in your home for life. The reverse mortgage doesn’t need to be repaid until you move out permanently, sell the home, or pass away.

This feature is what makes reverse mortgages so attractive for many seniors: they offer the ability to stay in the home you love without needing to make regular mortgage payments.

The only time a lender could require repayment early is if you break the conditions of the loan—such as failing to maintain the home or keep up with taxes and insurance. Even then, the lender typically gives you time to correct the issue first.

Can You Outlive Your Reverse Mortgage?

This is another common concern—and again, the answer is no, you can’t outlive your reverse mortgage.

Canadian reverse mortgages are designed with a “no negative equity guarantee.” This means:

You’ll never owe more than your home is worth when it’s time to repay the loan (as long as you meet the terms of the agreement).

If the housing market drops or the loan balance grows over time, you or your estate won’t be on the hook for the difference.

Also, because you're not making monthly payments, the loan balance increases over time due to compound interest. However, most people have significant equity remaining, especially if their home increases in value during the life of the loan.

So, even if you live in your home for 20+ years, the reverse mortgage won’t expire or force you out—it stays in place until you leave the home permanently.

What Are the Risks of Reverse Mortgages?

While reverse mortgages are safe and regulated in Canada, they still come with risks—just like any financial product. Here are the most important ones to consider:

1. Reduced Inheritance

Since the loan is repaid using the proceeds from the sale of your home, there may be less left over for your children or heirs. The longer the loan is in place, the more interest builds up, which can eat into the equity.

2. Interest Accumulates Over Time

You’re not making monthly payments, which is convenient—but it also means the interest gets added to your balance every month. Over time, this can add up quickly. That’s why reverse mortgages are often best used as a long-term solution, not just for short-term cash needs.

3. Fees and Upfront Costs

Reverse mortgages often include:

Appraisal fees

Legal fees

Administrative or setup fees

These costs are minimal and are usually deducted from the loan proceeds, but it’s still important to understand the full cost of borrowing.

4. Short-Term Planning Risks

If you only plan to stay in your home for a few years, a reverse mortgage may not be the best option. Why? Because the fees and compounding interest might outweigh the short-term benefits. In these cases, other solutions—like a home equity line of credit (HELOC) or downsizing—might make more financial sense.

5. Impact on Government Benefits

A reverse mortgage doesn’t affect Old Age Security (OAS) or Canada Pension Plan (CPP) benefits, because it’s not considered income. However, if you receive other income-tested benefits, like the Guaranteed Income Supplement (GIS), borrowing a large lump sum could affect eligibility if the funds are placed in your bank account.

Deciding If a Reverse Mortgage is Right for You

A reverse mortgage can be a powerful financial tool, especially for seniors who are:

House rich but cash poor

On a fixed income

Looking to stay in their home as long as possible

Not planning to leave the full value of their home to their children

But it’s not a one-size-fits-all solution. Here’s how to evaluate it:

1. Talk to a licensed mortgage broker who works with reverse mortgage lenders

2. Review all your options, including HELOCs, downsizing, or selling

3. Get independent legal advice before signing any documents

4. Involve family members in the discussion if you want to keep them informed about your estate planning

Are Reverse Mortgages Scams or Bad for Seniors?

Reverse mortgages are not scams, and they’re not automatically bad for seniors. In fact, for many Canadians, they offer a safe and flexible way to access home equity while staying in the home they love.

That said, they aren’t the right choice for everyone. Understanding how they work—along with the pros, cons, and long-term impact—is key to making a smart financial decision.

If you’re considering a reverse mortgage, speak to a licensed mortgage professional who can help assess your situation and guide you toward the best path forward.