A reverse mortgage lets you access money using your home equity without requiring any monthly mortgage payments. This lets homeowners over the age of 55 borrow money and not have to worry about paying it back until they choose to sell their home. In the meantime, interest will accumulate on their reverse mortgage. Use the list below to compare reverse mortgage interest rates, fees, and term options for reverse mortgage lenders in Canada.
Equitable Bank offers reverse mortgages to most major cities and towns in Ontario, British Columbia, Quebec, and Alberta. To qualify for an Equitable Bank reverse mortgage, you will need to be at least 55 years of age and have a home that has an appraised value of at least $250,000.
Equitable Bank offers three different types of reverse mortgages: Flex, Flex PLUS, and Flex Lite. Each has different eligibility requirements or maximum lending limits. The Reverse Mortgage Flex is Equitable Bank's original reverse mortgage and is suitable for most homeowners looking for a reverse mortgage.
The Flex Lite is for homeowners that might not want to borrow as much money. In return for a lower borrowing limit, Flex Lite borrowers will have a lower interest rate, with them currently being the best reverse mortgage rates in Canada. However, Flex Lite also only allows for a single lump-sum advance at the beginning of your term, which means that you won’t be able to schedule regular advances. For homeowners that want a higher borrowing limit, the Flex PLUS reverse mortgage grants a higher maximum limit but comes with a higher reverse mortgage rate and age requirement.
To learn more about Equitable Bank reverse mortgages, visit our reverse mortgage page.
|Flex||Flex PLUS||Flex Lite|
|Maximum Borrowing Limit (% of Your Home Value)||15% - 55%||45% - 59%||15% - 40%|
|Minimum Home Value||$250,000||$250,000||$250,000|
|How Can I Receive Payments?|
Regularly Scheduled Advances
Regularly Scheduled Advances
CHIP Reverse Mortgages are offered by HomeEquity Bank. Originally called the Canadian Home Income Plan, CHIP provides a source of tax-free income for those over the age of 55, and was Canada's original reverse mortgage product. HomeEquity Bank reverse mortgage offerings include CHIP, CHIP Max, CHIP Open, and Income Advantage
Each reverse mortgage product offers different features. The CHIP reverse mortgage provides a one-time lump-sum payment. CHIP Income Advantage lets you get regularly scheduled advances similar to a steady stream of tax-free income. CHIP Open is an open reverse mortgage that lets you repay without prepayment penalties. CHIP Max lets you access a larger portion of your home equity at a younger age.
To see how much you can borrow with a CHIP mortgage, visit our reverse mortgage calculator page.
|CHIP||Income Advantage||CHIP Max|
|Maximum Borrowing Limit (% of Your Home Value)||55%||55%||55%|
|Minimum Home Value||$200,000||$200,000||$300,000|
|How Can I Receive Payments?||Lump-Sum||Regularly Scheduled Advances|
Regularly Scheduled Advances
Reverse mortgage lenders charge processing fees and closing costs that add to the cost of your reverse mortgage. This means that in addition to the reverse mortgage interest rate, you will also be paying fees that increase the cost of borrowing. These fees can either be a flat fee or it can vary depending on the size of your reverse mortgage. For example, Equitable Bank charges a $995 set-up fee on top of any appraisal costs, legal advice, and legal fees. Getting Independent Legal Advice (ILA) can be required by lenders, and it can cost an additional $350 to $500.
To get a better understanding of how much a reverse mortgage would cost, it can be better to look at the mortgage’s APR. The APR accounts for interest rates along with fees and other costs of getting the mortgage.
The APR for the reverse mortgage products listed below is based on a $150,000 reverse mortgage that will be borrowed for 5 years. For CHIP Income Advantage, the APR is based on $150,000 being borrowed over 5 years, with $30,000 as a lump sum and the remaining $120,000 being borrowed as $2,000 per month for 5 years.
Reverse mortgages are riskier for lenders since you aren’t required to make any mortgage payments. Instead, the lender will only be repaid once you sell or move out of your home. To make up for this, reverse mortgage rates are higher than regular mortgage rates.
Interest for a reverse mortgage is only charged on the amount that you actually borrow. For example, you can borrow up to 55% on a $500,000 home depending on your age, which gives a maximum borrowing limit of $275,000. If you only borrow a lump sum of $100,000, then you will only be charged interest on the $100,000 that you borrowed, and not your limit of $275,000.
Interest is charged daily and compounded semi-annually for fixed interest rates, or compounded monthly for variable interest rates.
While mortgage interest will accumulate, both Equitable Bank and HomeEquity Bank CHIP guarantee that you won't owe more than the value of your home. For example, if you borrow $275,000 on a home that is worth $500,000, then it is guaranteed that you won’t owe more than $500,000, or the market value of your home. This means that you won’t need to make any extra payments to cover the reverse mortgage when you sell the home. Instead, the sale of the home can cover the cost of the reverse mortgage interest.
Let’s look at a home that has an appraised value of $500,000. You are 80 years old, which qualifies you to borrow a maximum of 55% of your home’s value. You choose to borrow a lump sum of $100,000 for a 5-year term with Equitable Bank. With Equitable Bank's Flex reverse mortgage, your annual interest rate is 4.89% before fees.
To calculate your reverse mortgage interest:
Convert to a daily interest rate
Reverse mortgage interest rates are quoted based on an annual interest rate. However, reverse mortgage interest is charged on a daily basis. This is similar to how interest is charged for a credit card. We can simply divide the annual interest rate by 360 to get a daily rate.
4.89% / 360 days = 0.01358%/day
Calculate the daily interest charged
To calculate the daily interest charged, multiply the daily interest rate by the amount borrowed, which is $100,000.
$100,000 x 0.01358% = $13.58 per day
Interest is only compounded twice a year, semi-annually. This means that the first six months are not compounded. Since interest costs $13.58 per day for a $100,000 mortgage, then multiply by six months.
$13.58 x 180 days = $2,444
After six months, the reverse mortgage balance is now $102,444. Interest will now be charged on top of the $2,444 interest, which is called compound interest. First calculate the daily interest charged, then again multiply by another six months.
$102,444 x 0.01358% = $13.91 per day
$13.91 x 180 days = $2,504
Add the interest to the existing mortgage to get your new mortgage balance.
$102,444 + $2,504 interest = $104,948
The total interest for one year would be $4,948 on a $100,000 reverse mortgage at a 4.89% interest rate.