Reverse Mortgage Myths: What Homeowners 55+ Need to Know

Written by Leanne Mollica, Mortgage Broker and Founder of My Mortgage Strategy, proudly serving the Shuswap, the Okanagan, and homeowners across British Columbia.

For many Canadians aged 55 and over, the family home is more than a place to live. It’s comfort, stability, and a lifetime of memories. But it’s also one of the largest financial assets you own.

If you’ve ever thought, “I have equity tied up in my home, but I don’t want to sell or move—and some extra cash flow would make life easier,” you’re not alone. Reverse mortgages are one option people consider, yet there are many misconceptions about how they work.

This guide breaks down the most common myths and provides a clear, factual understanding of reverse mortgages in Canada, so you can decide whether this tool fits your long-term plans.

Myth #1: “I’ll lose ownership of my home.”

Reality: With a reverse mortgage in Canada, you remain the legal owner of your home. The lender registers a mortgage charge (lien), but your name stays on title. You can continue living in the home as long as you meet the mortgage conditions, including paying property taxes, maintaining insurance, and keeping the home as your primary residence.

Myth #2: “My heirs will be stuck with a large bill.”

Reality: Canadian reverse mortgage products typically include a No Negative Equity Guarantee. As long as all mortgage conditions are met, the amount owed at repayment will not exceed the fair market value of the home at the time of sale.
Terms vary, so it’s important to review a lender’s specific conditions.

Myth #3: “Reverse mortgages are only for people in financial trouble.”

Reality: While some homeowners use them out of necessity, many financially secure Canadians use reverse mortgages strategically. This might include supplementing retirement income, funding renovations, avoiding early withdrawals from invested assets, or staying in their home longer.

Myth #4: “The interest will eat up all my equity.”

Reality: It is true that interest accrues over time because you’re not making monthly payments. However, this does not mean you automatically lose all your equity.

Many Canadian real estate markets have experienced multi-percent annual home-value growth over long periods. When markets perform favourably, property appreciation can help offset some of the accrued interest.
That said, home-value growth is never guaranteed. Equity will depend on factors such as market conditions, interest rates, property maintenance, and how long the loan is in place.

Myth #5: “A reverse mortgage will affect my pension or government benefits.”

Reality: Reverse mortgage funds are loan proceeds—not taxable income. In many cases, this means they do not affect programs such as OAS, CPP, or GIS.
However, how you use or invest the funds could affect future income-tested benefits. Always review your specific situation with a financial advisor or accountant.

The Big Question: “What if interest builds up faster than my home value rises?”

This is one of the most important considerations.

Yes—interest will accumulate.
No—that does not automatically mean your equity disappears.

Canadian home values have often risen over long periods, although results vary and appreciation is not guaranteed. Property value trends and loan structure matter.

Hypothetical Example (for illustration only)

• Home value: $800,000
• Reverse mortgage amount: $200,000
• Interest rate: 6.5%
• Interest added in one year: ~$13,000
• If the home value increased by 5% that year: ~$40,000

In this scenario, total equity would grow.
However, this is only one possible outcome. Real results depend on actual market performance, interest rates, property condition, and how long the loan is held.

This is why professional guidance and a clear long-term strategy are essential.

Key Considerations Before Choosing a Reverse Mortgage

1. Understand how interest works

Since you’re not making monthly payments, interest compounds over time. Make sure you understand how your specific product calculates it.

2. Your home must remain your primary residence

Most lenders require you to live in the home the majority of the year. Moving out permanently usually triggers repayment.

3. Property obligations still apply

You must stay current on property taxes, maintain insurance, and keep the home in reasonable condition. Falling behind may put the mortgage in default.

4. Know what triggers repayment

Reverse mortgages are typically repaid when you sell the home, move out, or upon death. Understanding this upfront helps with planning.

5. Borrowing amounts are limited

Lenders cap how much you can borrow based on your age, home value, and other factors. These limits help protect future equity.

6. Market fluctuations matter

Home values can rise or fall. Reverse mortgages work best when viewed across long-term horizons rather than short-term market changes.

7. Review alternatives

A reverse mortgage is one option. Depending on your goals, refinancing, downsizing, or other strategies may provide better outcomes.

Final Takeaway

A reverse mortgage can be a helpful retirement tool for some Canadian homeowners—but it is not a one-size-fits-all solution.
If you’re considering your long-term financial plan and want to understand how a reverse mortgage compares with other options, clear information and realistic scenarios are essential.

If you’d like to explore whether this option fits your retirement strategy or want help evaluating your alternatives, I’m here to support you with straightforward, unbiased guidance.

My Mortgage Strategy – Helping you make informed decisions with confidence.