Review CHIP Reverse Mortgage Options

Access up to 55% of your home’s equity without selling or making monthly payments

Ratesopedia’s Take: The CHIP reverse mortgage offers Canadian homeowners aged 55 and older a way to convert home equity into tax-free cash while staying in their home. It eliminates monthly mortgage payments but comes with higher interest rates than traditional mortgages and can reduce the inheritance you leave behind. Whether it makes sense depends on your retirement income needs, your comfort with growing debt against your home, and whether you plan to leave the property to heirs.

The CHIP reverse mortgage has become a more visible option for Canadian retirees in recent years, particularly as home values have risen and more people approach retirement with significant equity but limited cash flow. Understanding how this product works, what it costs, and when it might fit your situation requires looking beyond the marketing to the mechanics and trade-offs.

What Is a CHIP Reverse Mortgage

A reverse mortgage is a loan secured against your home that allows you to access a portion of your equity without selling the property or making monthly payments. The CHIP Reverse Mortgage is the branded product offered by HomeEquity Bank, the dominant provider in Canada’s reverse mortgage market.

Unlike a traditional mortgage where you make payments to reduce the balance, a reverse mortgage works in the opposite direction. You receive money upfront, and the loan balance grows over time as interest compounds. The loan only comes due when you sell the home, move out permanently, or pass away.

The funds you receive are not considered taxable income, which means they won’t affect Old Age Security or Guaranteed Income Supplement benefits. You remain the legal owner of your home throughout the term of the loan, and you’re responsible for maintaining the property, paying property taxes, and keeping home insurance current.

Eligibility Requirements

Qualifying for a CHIP reverse mortgage in Canada involves meeting several criteria related to your age, property, and residency status.

Age threshold: Every person listed on the property title must be at least 55 years old. If you own the home with a spouse or partner who is younger than 55, you won’t qualify until they reach that age.
Primary residence: The home must be your principal residence, meaning you live there at least six months of the year. Secondary properties, cottages, and investment properties are not eligible.
Property value: The home must have a minimum appraised value of $250,000 CAD. The actual amount you can borrow depends on the appraised value, your age, the property type, and its location.
Property type: Eligible properties include detached homes, semi-detached houses, townhouses, and condominiums. Mobile homes and raw land generally don’t qualify.
Property condition: The home must be in reasonable condition, and property taxes must be current. The lender will arrange an appraisal to verify both value and condition.
Existing debt: If you have an existing mortgage or home equity line of credit, it must be paid off using the reverse mortgage proceeds. The reverse mortgage lender needs to hold the first-position charge on your title.

There is no income or credit score requirement for a reverse mortgage. Because the loan is secured entirely by the property and doesn’t require monthly payments, the lender’s focus is on the home itself rather than your ability to make payments.

How Much Can You Borrow

The maximum loan-to-value ratio for a CHIP reverse mortgage is 55% of your home’s appraised value, though most borrowers access considerably less than that ceiling. The actual amount you can access depends on three primary factors.

The age of the youngest borrower on title is the most significant factor. Older borrowers can access a higher percentage of their home’s value. A 75-year-old homeowner in a major city will typically qualify for a larger loan than a 55-year-old in a smaller market, even if their homes are worth the same amount.

Property location matters because lenders assess risk differently based on market stability and liquidity. Homes in larger urban centres generally qualify for higher loan amounts than properties in rural or remote areas where selling could take longer or values could be more volatile.

Property type also plays a role. A detached home may qualify for a slightly higher percentage than a condominium, depending on the building’s age, reserve fund status, and other factors specific to strata or condo corporations.

Interest Rates and Costs

Reverse mortgage rates are higher than traditional mortgage rates or home equity lines of credit. As of early 2026, CHIP rates for fixed terms typically range from approximately 6% to 7.5%, depending on the term length and current market conditions. Variable rates are tied to the HomeEquity Bank prime rate plus a fixed spread. Rates and terms may vary by financial institution.

Interest compounds semi-annually, which is standard for Canadian mortgages. Because you make no monthly payments, each compounding period adds unpaid interest to the loan balance, and the next period’s interest is calculated on that larger total. This compounding effect is the core trade-off: you gain cash flow today, but the debt grows steadily over time.

Upfront Costs

Beyond the interest rate, you’ll encounter several upfront costs when setting up a reverse mortgage.

Closing fee: The greater of $2,995 or 1.25% of the loan amount, covering title search, title insurance, and mortgage registration.
Appraisal fee: Approximately $350 to $500, depending on property location and type.
Independent legal advice: Typically $500 to $900, though costs can increase if there are complications with the property title.

These costs are usually added to the loan balance rather than paid out of pocket, which means they start accumulating interest immediately. On a $200,000 loan, you would pay around $2,995 in closing fees plus roughly $850 to $1,400 for appraisal and legal work combined.

How the Product Works

Once you’re approved for a CHIP reverse mortgage, you can choose how to receive the funds. The product offers flexibility in disbursement that can match different financial strategies.

Disbursement Options

Lump sum: You receive the entire approved amount at once. The minimum initial advance is $25,000, and subsequent draws require at least $10,000 each if your loan structure permits them.
Income Advantage (scheduled advances): You receive regular monthly or quarterly payments, effectively creating a steady income stream from your equity. The minimum initial advance for this option is $20,000.
Combination: You can take a portion upfront and receive the remainder in scheduled payments, allowing you to address immediate needs while creating ongoing cash flow.

During the application process, you’ll provide government-issued photo identification for every person on title, a current property tax statement, proof of home insurance, and statements for any existing mortgage or home equity line of credit. The lender will order an appraisal and conduct a title search.

When Repayment Is Due

The loan balance becomes payable under four circumstances: you sell the home, you move out permanently, the last surviving borrower passes away, or you default on your obligations. Your ongoing obligations include keeping property taxes current, maintaining active home insurance, and keeping the property in reasonable condition.

When the last borrower passes away, the estate typically has 160 to 180 days to repay the balance. The estate can repay using any available funds, arrange new financing, or sell the property. If the sale takes longer due to market conditions, lenders generally work with estates that demonstrate they’re taking reasonable steps toward repayment.

Key Benefits

No monthly payments: You eliminate the monthly cash outflow required by traditional mortgages or home equity lines of credit, which can significantly reduce financial stress on a fixed retirement income.
Tax-free funds: The money you receive doesn’t count as taxable income and won’t reduce Old Age Security or Guaranteed Income Supplement benefits, unlike RRSP withdrawals or employment income.
Stay in your home: You retain ownership and can continue living in the home as long as you meet your obligations regarding taxes, insurance, and maintenance.
Flexible use: There are no restrictions on how you use the funds. Common uses include paying off high-interest debt, funding home renovations, covering unexpected medical expenses, or supplementing retirement income.
No negative equity guarantee: The amount you or your estate repays will never exceed the fair market value of your home at the time it’s sold, as long as you’ve met your mortgage obligations.

Important Limitations

Higher interest rates: Reverse mortgage rates run higher than traditional mortgages or home equity lines of credit, which means the loan balance grows faster over time.
Reduced inheritance: The growing loan balance reduces the equity you can leave to heirs. If you remain in the home for many years, compound interest can consume a significant portion of the property’s value.
Upfront costs: Closing fees, appraisal costs, and mandatory legal advice add several thousand dollars to your loan balance before you receive any benefit.
Limited lenders: Only two financial institutions currently offer reverse mortgages in Canada, which limits your ability to shop for competitive rates or terms.
Prepayment penalties: If you want to pay off the loan early, you may face penalties that decline over time but can still be substantial in the first few years.
Impact on future borrowing: You generally cannot use your home to secure another loan or open a home equity line of credit while a reverse mortgage is in place.

CHIP vs Home Equity Line of Credit

Many homeowners compare reverse mortgages to home equity lines of credit when deciding how to access their equity. Each product serves different needs and comes with distinct trade-offs.

Feature	CHIP Reverse Mortgage	Home Equity Line of Credit
Monthly payments	None required	Interest payments required
Income requirement	None	Yes, must qualify
Credit check	No	Yes
Interest rate	6-7.5% range (2026)	Prime + 0.5-1% typical
Maximum borrowing	Up to 55% of home value	Up to 80% combined loan-to-value
Repayment timing	When you sell, move, or pass away	Revolving, on demand

A home equity line of credit offers a lower interest rate and more borrowing capacity, but it requires you to make monthly interest payments and prove you have sufficient income to service the debt. If you’re on a fixed income and cannot qualify for a HELOC, or if making monthly payments would strain your budget, a reverse mortgage might be worth considering despite its higher cost.

Prepayment and Exit Options

You aren’t locked into a reverse mortgage with no way out. HomeEquity Bank allows penalty-free partial prepayments of up to 10% of the outstanding balance each year, provided the payment is made within 30 days of your contract anniversary date.

If you want to prepay more than that annual 10% allowance, or if you want to pay off the entire loan early, you’ll face prepayment penalties that decline over time. In the first year, the penalty is 5% of the amount exceeding your 10% privilege. This drops to 4% in year two, 3% in year three, and three months’ interest after the third anniversary. After five years, you can repay with just three months’ written notice and no penalty beyond three months’ interest if you fail to provide that notice.

Two important exceptions reduce penalties further. If the last borrower moves into a long-term care facility or retirement residence, prepayment charges are reduced by 50%. When the last borrower passes away, prepayment charges are waived entirely, which matters for estate planning since heirs won’t face early repayment penalties.

Who Might Consider This Product

A reverse mortgage could make sense in specific situations where other options are limited or less suitable.

Limited retirement income: You have significant home equity but limited monthly income from pensions, government benefits, or savings, and you want to avoid drawing down investments.
Cannot qualify for traditional lending: Your income or credit situation prevents you from obtaining a home equity line of credit or refinancing your existing mortgage.
Want to age in place: You’re committed to staying in your home and don’t want to downsize or move to access your equity.
Need to eliminate debt payments: You have an existing mortgage or other debts with monthly payments that strain your budget, and using a reverse mortgage to pay them off would improve your cash flow.
Inheritance not a priority: You have no heirs, or you’ve discussed the decision with family members who understand the impact on the estate.

Consider Alternatives If

You can qualify for a HELOC: If you have sufficient income to make monthly interest payments, a home equity line of credit will cost substantially less over time.
Downsizing is realistic: If moving to a smaller home would free up enough equity to meet your needs without taking on debt, the transaction costs of selling might be lower than years of compounding interest.
Preserving inheritance matters: If leaving the full value of your home to heirs is important, a reverse mortgage works directly against that goal.
You might move soon: If there’s a reasonable chance you’ll need to move into care or relocate within a few years, the upfront costs and early prepayment penalties make a reverse mortgage expensive for short-term needs.

Bottom Line

The CHIP reverse mortgage serves a specific purpose in Canadian retirement planning. It allows homeowners aged 55 and older to convert home equity into usable cash without monthly payments or income qualification. For someone who wants to stay in their home, cannot qualify for traditional lending, and isn’t concerned about maximising inheritance, it can provide meaningful financial flexibility.

The trade-off is clear: you pay a premium in the form of higher interest rates and upfront costs, and your debt grows over time instead of shrinking. Whether that exchange makes sense depends on your specific financial situation, your other options for accessing capital, and your plans for the home and your estate.

Before committing to a reverse mortgage, compare the total cost against alternatives like downsizing, a traditional refinance, or drawing from other savings. The mandatory independent legal advice isn’t just a regulatory checkbox. It’s an opportunity to discuss the long-term implications with someone who can help you see the full picture. Looking for more ways to optimise your retirement finances? Subscribe to our newsletter for practical strategies and updated product comparisons.

CHIP Reverse Mortgage – FAQ

What is the minimum age to qualify for a CHIP reverse mortgage in Canada?

Every person listed on the property title must be at least 55 years old. If you own the home with a spouse or partner, both of you must meet this age requirement before you can apply.

Do I still own my home if I get a reverse mortgage?

Yes. You remain the legal owner of your home and stay on title. The lender registers a mortgage charge as security for the loan, but you retain ownership as long as you meet your obligations regarding property taxes, insurance, and maintenance.

Will a reverse mortgage affect my Old Age Security or GIS benefits?

No. Reverse mortgage funds are treated as loan proceeds, not taxable income, so they do not reduce Old Age Security or the Guaranteed Income Supplement. Unlike RRSP withdrawals, reverse mortgage advances don’t appear as income on your tax return.

What happens if the loan balance exceeds my home’s value?

HomeEquity Bank provides a no negative equity guarantee, meaning the amount you or your estate repays will never exceed the fair market value of your home when it’s sold, provided you’ve met your mortgage obligations. The lender absorbs any shortfall.

Can I pay off a reverse mortgage early?

Yes. You can make penalty-free partial prepayments of up to 10% of the outstanding balance each year on your anniversary date. Larger prepayments or full repayment will trigger declining penalties that drop to three months’ interest after three years and disappear after five years with proper notice.

How do CHIP reverse mortgage interest rates compare to regular mortgages?

Reverse mortgage rates are higher than traditional mortgage rates. As of early 2026, CHIP rates typically range from 6% to 7.5% for fixed terms, while traditional mortgages and home equity lines of credit generally offer lower rates. Rates and terms may vary by financial institution.

What happens to the reverse mortgage when I die?

The full loan balance becomes due when the last borrower passes away. Your estate typically has 160 to 180 days to repay the loan, either by selling the property, using other estate funds, or arranging new financing. Prepayment penalties are waived upon death.

Can I get a reverse mortgage if I still have an existing mortgage?

Yes, but your existing mortgage must be paid off using the reverse mortgage proceeds. The reverse mortgage lender requires first-position security on your title, so any existing secured debt must be cleared before the reverse mortgage funds are disbursed to you.