How a reverse mortgage actually works.
Seven steps from first conversation to funding, plus the numbers nobody puts on a brochure: the real rate, the real closing costs, and what happens if you break it early.
1 · Confirm eligibility
Every owner on title must be 55 or older, and the home must be your principal residence for at least six months a year. There's no income or credit qualification the way there is on a conventional mortgage — the property and your ability to maintain it are what matter.
2 · Establish the value
The lender orders an independent appraisal. Your BC Assessment number is a starting point, not the number that gets used. In this market plenty of homes appraise below assessed value — we'd rather you know that up front.
3 · Set the amount
Qualifying amounts run to roughly 55% of appraised value, driven by the age of the youngest owner, the property type and the location. Older borrower, higher percentage. Any existing mortgage or line of credit registered on title must be paid out from the proceeds first.
4 · Choose how you receive it
A single lump sum, scheduled monthly or quarterly advances, a lump sum plus advances, or funds held back for later draws. Structure matters: money you don't take isn't accruing interest, so most people should take less than the maximum.
5 · Independent legal advice
Required by law in Canada. You sit with your own lawyer, without the broker or lender present, and they confirm you understand what you're signing. It's a protection, not a formality.
6 · Live in the home, payment-free
No required monthly payment. You keep title and ownership. You keep the property insured, in good repair and the property taxes current. Interest accrues on the balance.
7 · Repayment
The loan is repaid when the home is sold, when the last borrower moves out permanently or passes away. The no-negative-equity guarantee means that as long as you've met your obligations, you or your estate will never owe more than the fair market value at the time of sale.
What it costs, precisely.
Current rates
We illustrate everything on the 7.99% five-year fixed (APR 8.45%) — CHIP Max 5-year fixed, effective July 3, 2026. Interest compounds semi-annually, not in advance, which is the Canadian disclosure standard.
One-time setup costs
These come out of the advance, not your bank account. Minimum initial advance is $25,000; subsequent draws start at $5,000.
Prepayment and penalties
Pay it out in year 1 or 2 and the penalty is 5% of the amount repaid; year 3, 4% ; year 4, 3%; after that it's typically three months' interest. Pay it out at maturity, or after moving to long-term care or on the death of the borrower, and the penalty is generally waived.
You can also pay up to 10% of the outstanding balance on any anniversary without penalty, and make voluntary monthly interest payments any time — both flatten the compounding curve considerably.
What it does not affect
Funds are a loan advance, not income. They are tax-free and do not affect OAS, GIS or CPP benefits, and they don't get added to your taxable income.
You keep title. The lender does not own your home and cannot force a sale while you meet your obligations — occupancy, taxes, insurance and upkeep.
Interest compounds. That's the whole trade-off.
No payment means the balance grows. At current rates a balance roughly doubles in about nine years if you never pay a dollar toward it. Two things sit on the other side of the ledger: your home is compounding too, and you can slow the balance down whenever you like with voluntary interest payments or the 10% annual privilege. We show you the balance, the projected home value and the equity in between — every year, in dollars.
Documents required
Reverse mortgage underwriting focuses on the home and your ability to keep it, not on income qualification. Here's the standard package.
- Two pieces of government-issued ID for every borrower on title
- Proof of age (55+) for each borrower — passport, BC driver's licence, or birth certificate
- SIN (for credit consent — not written on documents)
- 3-year address history
- Power of Attorney documents, if applicable
- Current mortgage statement (balance, rate, maturity date, penalty)
- Most recent property tax notice — paid up to date
- Home insurance policy declaration page
- For strata: current Form B and monthly fee confirmation
- Recent BC Assessment or appraisal (if available)
- Title search / State of Title Certificate
- Existing mortgage payout statement (if any balance remains)
- Contact for your independent legal counsel (required by every reverse mortgage lender)
- Contact for your accountant or financial advisor (recommended)
- Discussion with named beneficiaries / adult children (strongly recommended)
- Void cheque for deposit of funds
- Written funding schedule if choosing monthly advances
- Estate/will documentation if requested by counsel
Send documents as PDFs or clear photos. Everything is transmitted through the secure DLC portal — nothing sensitive over email.
If you fit one of these buckets, you deserve to see every option — not just the one that pays us.
Tyler Waldron is licensed as both a mortgage broker (MB611612) and a realtor through Engel & Völkers. So alongside any reverse mortgage scenario, we'll also model what selling and rightsizing would actually leave you with — selling costs, property transfer tax, moving costs and all. Same advisor, both sides of the math, and no pressure to pick either one.