How Can The Money Be Accessed?

Once a reverse mortgage is approved, the current mortgage must be paid off and any outstanding loans or lines of credit that are secured by the home must be closed.  The money from the reverse mortgage can they be used to pay everything off and the balance of remaining can be used for anything such as home improvements/repairs, regular bill payments, or to repay other debts. The money can be accessed in the following two ways:

  • A one-time lump sum
  • Taking an amount up front and then receiving the rest in installments

Ask your lender what payment options they offer for a reverse mortgage. Also ask whether there are any restrictions or fees.

How is the Money Repaid?

Reverse mortgages do not have regular payments. However, interest will be charged to the original loan amount until the loan is paid in full. Interest will continue to increase the loan amount over time, which is very important to keep in mind. When the home is sold or is no longer used as the borrower’s primary residence, the entire amount owing will need to be paid back.

The option to make payments towards the principal and interest at any time is available but could be subject to a fee. Defaulting on the loan will require payment in full.  Defaults could include:

  • Using the money for something illegal
  • Lying on the application
  • Allowing the value of the home to decrease due to negligence
  • Not adhering to the conditions of the reverse mortgage
  • Upon the sale of the home or death, the entire amount will have to be paid off. The time allowed for the complete repayment will vary.

Pros and Cons of a Reverse Mortgage

Here are some pros and cons to consider before applying for a reverse mortgage:


No regular loan payments

  • No regular loan payments
  • You can live in the home
  • Don’t have to sell your home
  • Your loan is tax-free
  • No effect on Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits
  • Options on how to receive the money


  • High interest rates
  • Building interest can reduce the equity in the home
  • The estate will have to repay the loan and interest in full when the borrower dies
  • Estate settlement time could be longer than the time given to repay
  • Less money to leave to beneficiaries upon death
  • Higher costs than a regular mortgage or other loan options

Important Questions to Ask The Lender

Remember to ask the lender these questions before making any commitments:

  • How do I access my money?
  • What are the fees and penalties?
  • What is the interest rate?
  • Are there time restrictions on when I can sell my home?
  • How long does my estate have to pay off the balance?
  • What if the amount of the loan is higher than my home’s value when the loan is due?

Shop around and explore your options before you get a reverse mortgage. Your financial institution may offer other products that might meet your needs.

Compare the costs of the following potential alternatives to a reverse mortgage:

  • getting another type of loan, such as a personal loan, line of credit or credit card
  • selling your home
  • buying a smaller home
  • renting another home or apartment
  • moving into assisted living, or other alternative housing

You may want to speak with a financial advisor and your family before getting a reverse mortgage. Make sure you understand how a reverse mortgage works and how it can affect your home equity over time.