New Paragraph

3 Misconceptions About Reverse Mortgages in Canada

CoryVance • August 2, 2018

One of the benefits of working with an independent mortgage professional is choice when it comes to mortgage product. When you work with a single bank or financial institution, you are limited to the products they offer. When you deal with a mortgage broker, you gain access to products from many lenders. Some of these products are very specialized and provide financing solutions as unique as the people they were developed for.

One such product is a reverse mortgage. In Canada, HomEquity Bank offers the CHIP reverse mortgage to homeowners 55+. It’s certainly not for everyone, but while mortgage products are becoming increasingly difficult to qualify for in Canada, it’s certainly worth considering if you meet the criteria. The following article was written by Roland Mackintosh, a business development manager at HomEquity.

If you have any questions about your financial situation, your current mortgage, or learning more about a CHIP reverse mortgage (for you or your parents), please don’t hesitate to contact me anytime!

Top 3 misconceptions about Reverse Mortgages:

I recently read an article by Jamie Hopkins in Forbes magazine, entitled “ Americans Don’t Even Know What Their Most Important Retirement Asset Is.” The article highlighted three common misconceptions about reverse mortgages and unsurprisingly, they are prevalent in Canada as well as in the U.S.

The top 3 misconceptions about Reverse Mortgages are as follows:

1. The bank owns your home.
2. Your estate can owe more than your home
3. The best time to take a Reverse Mortgage is at the end of your retirement

Let’s examine each misconception in more detail.

The bank owns your home.

Over 50% of Canadian homeowners over the age of 65, believe the bank owns your home once you’ve taken a reverse mortgage. Not true! We simply register our position on the title of the home, exactly the same as any other mortgage instrument, with the main difference in the flexibility of not having to make P&I payments on the reverse mortgage.

Your estate can owe more than your home.

A reverse mortgage, unlike most traditional mortgages in Canada, is a non-recourse debt. Non-recourse means if a borrower defaults on the loan, the issuer can seize the home asset, but cannot seek any further compensation from the borrower – even if the collateral asset does not fully cover the full value of the loan. Therefore, when the last homeowner dies (and the reverse mortgage is due), the estate will never be responsible for paying back more than the fair market value of the home. The estate is fully protected – this is not the case for almost any other mortgage loan in Canada, which is full recourse debt. So read the fine print the next time you offer to co-sign for a loan for mom!

The best time to take a Reverse Mortgage is at the end of your retirement.

This is a common mistake that reflects an “old-school” financial planning mentality. For the majority of Canadians (without a nice government pension), the old school financial planning mentality is about cash-flow, and is as follows:

a) Begin drawing down non-taxable assets to supplement your retirement income.
b) Once your non-taxable assets are depleted, begin drawing down more of your registered assets (RSP/RIF) to supplement retirement income.
c) Once your registered assets are depleted, sell your home, downsize and re-invest to generate enough cash-flow to last you until you die.

The problem with the “old-school” financial planning model is two-fold:

1. 91% of Canadian seniors have no plans to sell their home ( CBC News “Canadian Boomers Want To Stay In Their Homes As They Age ).

2. You are missing out on a huge tax-saving opportunity by not taking out a reverse mortgage in the beginning of your retirement.

“Research has consistently shown that strategic uses of reverse mortgages can be used to improve a retiree’s financial situation, and that reverse mortgages generally provide more strategic benefits when used early in retirement as opposed to being used as a last resort.” –  Jamie Hopkins, Forbes

In Canada, a reverse mortgage can be set-up to provide homeowners with a monthly draw out of the approved amount. For example: client is approved for $240,000 and decides to take $1,000/month. This is deposited into the clients’ bank account over the next 20-years. Interest accumulates only on the amount drawn (ie: not on the full dollar amount at the onset).

This strategy allows clients to draw down less income from their registered assets to support their retirement lifestyle. In turn, this can create some excellent tax savings, since home equity is non-taxable. Imagine lowering your nominal tax bracket by 5 – 10% each and every year over a 20 year period? The tax savings can be huge. You are also able to preserve your investable assets, which historically, can generate a higher rate of return when invested over a greater period of time.

Share

RECENT POSTS  

Mortgages Aren’t One-Size-Fits-All

By Cory Vance • January 13, 2026
Why the Cheapest Mortgage Isn’t Always the Smartest Move Some things are fine to buy on the cheap. Generic cereal? Sure. Basic airline seat? No problem. A car with roll-down windows? If it gets you where you're going, great. But when it comes to choosing a mortgage? That’s not the time to cut corners. A “no-frills” mortgage might sound appealing with its rock-bottom interest rate, but what’s stripped away to get you that rate can end up costing you far more in the long run. These mortgages often come with severe limitations—restrictions that could hit your wallet hard if life throws you a curveball. Let’s break it down. A typical no-frills mortgage might offer a slightly lower interest rate—maybe 0.10% to 0.20% less. That could save you a few hundred dollars over a few years. But that small upfront saving comes at the cost of flexibility: Breaking your mortgage early? Expect a massive penalty. Want to make extra payments? Often not allowed—or severely restricted. Need to move and take your mortgage with you? Not likely. Thinking about refinancing? Good luck doing that without a financial hit. Most people don’t plan on breaking their mortgage early—but roughly two-thirds of Canadians do, often due to job changes, separations, relocations, or expanding families. That’s why flexibility matters. So why do lenders even offer no-frills mortgages? Because they know the stats. And they know many borrowers chase the lowest rate without asking what’s behind it. Some banks count on that. Their job is to maximize profits. Ours? To help you make an informed, strategic choice. As independent mortgage professionals, we work for you—not a single lender. That means we can compare multiple products from various financial institutions to find the one that actually suits your goals and protects your long-term financial health. Bottom line: Don’t let a shiny low rate distract you from what really matters. A mortgage should fit your life—not the other way around. Have questions? Want to look at your options? I’d be happy to help. Let’s chat.

Smart Strategies to Save for Your Down Payment

By Cory Vance • January 6, 2026
How to Start Saving for a Down Payment (Without Overhauling Your Life) Let’s face it—saving money isn’t always easy. Life is expensive, and setting aside extra cash takes discipline and a clear plan. Whether your goal is to buy your first home or make a move to something new, building up a down payment is one of the biggest financial hurdles. The good news? You don’t have to do it alone—and it might be simpler than you think. Step 1: Know Your Numbers Before you can start saving, you need to know where you stand. That means getting clear on two things: how much money you bring in and how much of it is going out. Figure out your monthly income. Use your net (after-tax) income, not your gross. If you’re self-employed or your income fluctuates, take an average over the last few months. Don’t forget to include occasional income like tax returns, bonuses, or government benefits. Track your spending. Go through your last 2–3 months of bank and credit card statements. List out your regular bills (rent, phone, groceries), then your extras (dining out, subscriptions, impulse buys). You might be surprised where your money’s going. This part isn’t always fun—but it’s empowering. You can’t change what you don’t see. Step 2: Create a Plan That Works for You Once you have the full picture, it’s time to make a plan. The basic formula for saving is simple: Spend less than you earn. Save the difference. But in real life, it’s more about small adjustments than major sacrifices. Cut what doesn’t matter. Cancel unused subscriptions or set a dining-out limit. Automate your savings. Set up a separate “down payment” account and auto-transfer money on payday—even if it’s just $50. Find ways to boost your income. Can you pick up a side job, sell unused stuff, or ask for a raise? Consistency matters more than big chunks. Start small and build momentum. Step 3: Think Bigger Than Just Saving A lot of people assume saving for a down payment is the first—and only—step toward buying a home. But there’s more to it. When you apply for a mortgage, lenders look at: Your income Your debt Your credit score Your down payment That means even while you’re saving, you can (and should) be doing things like: Building your credit score Paying down high-interest debt Gathering documents for pre-approval That’s where we come in. Step 4: Get Advice Early Saving up for a home doesn’t have to be a solo mission. In fact, talking to a mortgage professional early in the process can help you avoid missteps and reach your goal faster. We can: Help you calculate how much you actually need to save Offer tips to strengthen your application while you save Explore alternate down payment options (like gifts or programs for first-time buyers) Build a step-by-step plan to get you mortgage-ready Ready to get serious about buying a home? We’d love to help you build a plan that fits your life—and your goals. Reach out anytime for a no-pressure conversation.

STAY INFORMED

Subscribe to my newsletter

STAY INFORMED