A reverse mortgage can be a powerful financial tool for Canadian homeowners aged 55 and above. It allows you to access the equity in your home — tax-free — while still living in it, without making monthly payments. But what happens when you pass away, decide to move, or your home is eventually sold?

This is one of the most important questions you (and your loved ones) should ask when considering a reverse mortgage. At Legacy Unlocked, we’re committed to ensuring you have a full understanding of how reverse mortgages work — not just today, but down the road.

When Is a Reverse Mortgage Repaid?

A reverse mortgage is repaid when any one of the following occurs:

• You permanently move out of the home (for example, into long-term care)

• You sell the home

• The last borrower passes away

At that point, the full loan balance — including any interest that has accumulated — becomes due. This amount is typically repaid using the proceeds from the sale of the home.

What Happens to the Home?

Your home remains in your name throughout the entire time you have a reverse mortgage. When repayment is triggered, your estate or family will usually sell the home and use those proceeds to pay off the balance.

Here’s how it typically works:

• Your estate executor or family lists the home for sale.

• The home sells, and the reverse mortgage is paid out in full from the sale price.

• Any remaining equity (after paying off the reverse mortgage and any legal or selling fees) goes to your heirs or estate.

What If My Family Wants to Keep the Home?

If your children or family members want to keep the home, they can choose to pay off the reverse mortgage balance using other means — such as cash savings, a new mortgage in their own name, or refinancing. The lender doesn’t require that the home be sold — just that the loan is repaid in full.

Will My Family Inherit Debt?

This is a common concern — but the short answer is no. Your family will never inherit debt from a reverse mortgage.

In Canada, reverse mortgages offered by federally regulated lenders (such as HomeEquity Bank, provider of the CHIP Reverse Mortgage) come with a No Negative Equity Guarantee. This means:

If your home sells for less than the balance owing on the reverse mortgage, your estate will never be responsible for making up the difference.

As long as your home is maintained and taxes are paid, the most your estate will owe is the fair market value of the home at the time of sale.

Will There Be Enough Equity Left?

It’s a fair question. Since you’re not making monthly payments and interest accumulates over time, your reverse mortgage balance does grow — which can reduce the remaining equity in your home.

However, most reverse mortgage borrowers in Canada still retain more than 50% of their home’s equity when the loan is repaid.

In addition, Canadian home values have historically increased over time. In many cases, rising property values help preserve — or even grow — the total estate value, despite interest charges.

Example:

• Reverse mortgage loan amount: $250,000

• Duration: 10 years

• Interest: Approximately $150,000

• Final loan balance: ~$400,000

• Home’s value after 10 years: $750,000

• Remaining equity for your estate: $350,000

(Note: This is a general example for illustration only — your situation may vary.)

How to Prepare Your Family

It’s always a good idea to involve your loved ones in your financial planning — especially when it comes to your home. Here are a few ways to ensure a smooth transition:

• Let them know you have a reverse mortgage and how it works

• Explain your intentions for your home (whether you plan to sell, stay, or pass it on)

• Keep your will and estate plans up to date

• Share the contact information of your mortgage advisor with your executor

Open communication now can reduce confusion and stress later.

Final Thoughts

A reverse mortgage doesn’t mean losing control of your home or burdening your family. In fact, when used thoughtfully, it can provide financial freedom for you and security for your loved ones.

When it’s time to repay, your home’s value is used to cover the balance — and any leftover equity stays in your family’s hands. With proper planning, you can enjoy the retirement you deserve while protecting your legacy.

Curious how a reverse mortgage could fit into your long-term plans? Let’s talk. Book your free consultation today.

References:

1. Financial Consumer Agency of Canada. (2022). What happens to your reverse mortgage. https://www.canada.ca

2. HomeEquity Bank. (2023). Estate Planning and Reverse Mortgages. https://www.chip.ca

3. Mortgage Professionals Canada. (2022). Reverse Mortgages and Estate Planning.https://mortgageproscan.ca