Key Takeaway

A CHIP reverse mortgage lets Canadian homeowners aged 55 and older borrow against their home equity without making monthly payments. You receive a lump sum, regular payments, or a line of credit, and the loan (plus compounding interest) is repaid when you sell, move permanently, or pass away. Setup costs typically range from 2% to 5% of your home value, and interest rates run 2 to 4 percentage points above standard mortgage rates as of August 2026.

What Is a CHIP Reverse Mortgage?

The Canadian Home Income Plan (CHIP) reverse mortgage is a loan secured against your home that does not require monthly repayment during your lifetime, provided you continue living in the property. Offered primarily through HomeEquity Bank, it allows homeowners 55 and older to convert a portion of their home equity into cash while retaining ownership and the right to live in the home.

Unlike a traditional mortgage or home equity line of credit (HELOC), a CHIP reverse mortgage does not demand regular principal or interest payments. Instead, interest compounds over the life of the loan and the full balance becomes due when the last borrower permanently leaves the home, sells the property, or passes away. The loan-to-value limit ranges from 20% to 55% of your home’s appraised value, depending on your age, property location, and property type (FCAC, 2026).

This structure distinguishes CHIP from standard refinancing or equity access products, which require ongoing monthly payments and active debt servicing. Foundational finance texts such as Principles of Finance explain that deferred-payment structures like reverse mortgages shift the repayment obligation to a future liquidity event, making them suitable for retirees with substantial home equity but limited monthly income.

How a CHIP Reverse Mortgage Works in Canada

To qualify, you must be at least 55 years old (all owners on title must meet the age threshold), own a home in a participating Canadian municipality, and hold sufficient equity. The home must be your principal residence. Condominiums, single-family homes, and some multi-unit properties are eligible, though approval depends on location and condition.

The loan amount you can access depends on your age (older borrowers qualify for higher loan-to-value ratios), your home’s appraised value, and the property’s location. A 65-year-old homeowner with a property appraised at C$500,000 in a major urban centre might access up to C$250,000, while a 55-year-old in a smaller market might qualify for 20% to 30% of the same value.

Once approved, you choose how to receive funds: a lump sum, scheduled regular advances, a standby line of credit, or a combination. The unused portion of a line of credit does not accrue interest until drawn.

Interest compounds semi-annually at a fixed or variable rate, and the total debt grows over time. There are no monthly payments required. The loan becomes due in full when you sell the home, move into long-term care for more than a continuous period (typically six to twelve months depending on the agreement), or upon death. At that point, you or your estate repays the loan from the sale proceeds. Any remaining equity after repayment belongs to you or your heirs.

You remain responsible for property taxes, home insurance, and maintenance throughout the loan term. Failure to meet these obligations can trigger early repayment.

What a CHIP Reverse Mortgage Costs

Setup costs for a CHIP reverse mortgage include an appraisal fee (C$300 to C$500), legal fees (C$1,000 to C$2,000 for independent legal advice, which is mandatory), and an origination or administration fee. The lender may also charge a setup fee of up to 3% of the loan amount. Combined, these upfront costs typically amount to 2% to 5% of your home’s value.

Interest rates on CHIP reverse mortgages are higher than those on traditional mortgages or HELOCs because the lender assumes greater risk with no monthly cash flow and a deferred repayment. As of August 2026, rates range from approximately 6.5% to 9.0%, compared to standard fixed mortgage rates around 4.5% to 5.5% for a five-year term (Ratehub, 2026). Rates vary by term (one-year, three-year, or five-year fixed terms are common) and whether the rate is fixed or variable.

Read also: HELOC versus Refinance in Canada: Which Is Better for Accessing Home Equity

Because no payments are made during the loan, interest compounds. A C$100,000 advance at 7.5% annual interest (compounded semi-annually) grows to approximately C$148,000 after five years, C$219,000 after ten years, and C$324,000 after fifteen years. The compounding effect means the debt grows faster the longer the loan remains outstanding.

Early repayment is possible but typically carries a prepayment penalty calculated as the greater of three months’ interest or an interest rate differential (IRD), depending on the term and rate type. Partial prepayments may be allowed up to a specified annual limit (commonly 10% of the original principal per year) without penalty.

Calculating Your CHIP Reverse Mortgage Proceeds

Estimating how much you can borrow, what the loan will cost over time, and how much equity will remain for your estate requires factoring in your age, home value, chosen advance amount, interest rate, compounding schedule, and the expected duration of the loan.

A cash-out refinance calculator adapted for reverse mortgage parameters can help you model different scenarios: entering your home’s current appraised value, your age, the percentage you wish to borrow, the interest rate quoted, and an estimated time horizon lets you see the projected loan balance at various future points and the remaining equity after repayment.

The calculator shows you the impact of different draw amounts (borrowing 30% versus 50% of your home value), different interest rates, and different time periods, making it easier to compare options and understand long-term costs before committing.

Before You Decide

A CHIP reverse mortgage is general educational information only, not personalized financial, lending, legal, or tax advice, and not an offer or commitment to lend. Reverse mortgage eligibility, loan-to-value limits, interest rates, fees, prepayment terms, and repayment triggers vary by lender, property location, property type, and your personal circumstances. Provincial regulations and tax treatment may differ across Canada.

Interest rates and fees change. The figures cited reflect August 2026 market conditions and are subject to change. Verify current rates, terms, and total costs with a licensed mortgage professional or the lender before proceeding.

Independent legal advice is mandatory for CHIP reverse mortgages in Canada. A lawyer will explain the agreement, repayment obligations, and risks, including the compounding interest effect and the potential for the loan balance to grow significantly over time, which may reduce or eliminate the equity available to your estate.

Consider alternatives such as downsizing, a traditional HELOC (if you can service monthly payments), a home equity loan, or refinancing your existing mortgage to access equity with lower interest costs. Consult a licensed mortgage broker, a fee-only financial planner, or the Financial Consumer Agency of Canada (FCAC) for guidance tailored to your retirement income strategy and estate planning goals.