What Does a Reverse Mortgage Actually Cost? A Straight Answer.

By Connie Graham and Briana Hennigan |

 

People don't always ask this question directly — but it's the one underneath almost every other concern. So here's the honest, clear breakdown of what a reverse mortgage costs in Canada, and what you should factor in before deciding.

Reverse mortgages are not free money. They're a loan, and like any loan, they have costs — both upfront and ongoing. Understanding those costs clearly is the only way to decide whether this product makes sense for your situation.

Let me walk through both.

Upfront Costs

When you set up a reverse mortgage, expect to pay for:

Home appraisal — The lender needs an independent assessment of your home's value to determine how much you qualify for. This typically runs $300–$600 depending on your property and location.

Legal fees — You're required to get independent legal advice before signing. This is actually a consumer protection built into the product — your lawyer reviews the documents and confirms you understand what you're signing. Budget $500–$1,000 for this.

Lender setup/administration fee — This varies by lender. HomeEquity Bank (CHIP) charges an arrangement fee; Equitable Bank's fee structure differs. Ask for this number specifically before committing.

In total, expect $1,500–$3,000 in upfront closing costs, though this can vary. Some lenders allow these to be rolled into the loan so there's no out-of-pocket expense at closing.

The Ongoing Cost: Interest

This is the big one — and the one most worth understanding clearly.

Reverse mortgage interest rates in Canada are higher than traditional mortgage rates. As of mid-2026, fixed rates are generally in the 6–7% range depending on the lender and term, though this changes over time. There are also variable rate options.

The reason rates are higher: the lender is taking on more risk. There are no monthly payments, so interest compounds over the life of the loan. The longer you hold the reverse mortgage, the larger the balance grows.

Here's a simple example: If you borrow $100,000 at 6.5% and hold the reverse mortgage for 10 years with no payments, your outstanding balance would be roughly $188,000 at the end of that period. The equity in your home needs to have grown — or been substantial enough — to absorb that.

This is why I always run the numbers with clients before recommending this product. You need to see what the balance looks like at 5 years, 10 years, 15 years — and compare that to a realistic projection of what your home might be worth at those points.

Prepayment Penalties

If you decide to pay off the reverse mortgage early — because you sell, move, or simply want to — prepayment charges may apply, particularly in the first few years of a fixed term. These can be significant, so understanding the prepayment terms before you sign matters.

Ask every lender: What would it cost me to pay this off in year one? Year three? Year five?

What You're Getting in Return

Set against those costs, you're getting:

  • Tax-free cash with no monthly payments

  • The ability to stay in your home

  • No impact on OAS, GIS, or other government benefits (since it's a loan, not income)

  • Flexibility to receive funds as a lump sum, in installments, or a combination

For some people — particularly those who are house-rich and cash-poor, and want to age in place — the cost is absolutely worth it. For others, a HELOC or downsizing makes more financial sense.

My Honest Take

The cost of a reverse mortgage is real, and it compounds. I'd never encourage someone to take one without fully understanding what their balance will look like over time. But I also wouldn't dismiss it — for the right person in the right situation, it genuinely solves a problem that nothing else can.

The question I always ask clients: What's this money for, and how long do you plan to stay in your home? The answers to those two questions tell us a lot about whether the cost makes sense.

If you want to run the numbers for your specific situation, I'm happy to do that with you — no obligation, just clarity.

 

Connie Graham is a mortgage broker with 20+ years of experience helping Canadians navigate their mortgage options with confidence. Questions about reverse mortgages? Reach out anytime.

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