5 Alternatives to a Reverse Mortgage You Should Consider First

A reverse mortgage isn't the only way to access your home equity. Sometimes it's the right tool. Often, one of these alternatives is better. Here are the five most common alternatives Canadian homeowners 55+ should consider before signing anything.

1. Home Equity Line of Credit (HELOC)

The most common alternative. A HELOC gives you a revolving credit line secured against your home, with interest-only minimum payments and rates around prime + 0.5–1.5%.

Better than a reverse mortgage when:

• You can qualify based on income and credit
• You can comfortably afford monthly interest payments
• You only need occasional access to funds, not a steady stream
• You want to preserve maximum equity for heirs

Worse than a reverse mortgage when:

• Your income doesn't support the monthly payments
• The bank won't approve you despite your equity
• You want to fully decouple from debt service in retirement

The HELOC is almost always cheaper if you qualify. If you don't, it's not an option at all.

2. Downsizing

Selling your current home and buying a smaller, less expensive one frees up the equity directly — no loan required. If your $1.2M home becomes a $700K condo, you've extracted $500K (minus selling costs and taxes) with no interest, no fees, and no compounding.

Better when:

• You're open to moving and don't have strong attachment to your current home
• The home is too large or expensive to maintain
• A condo or smaller home would actually suit your lifestyle better
• You want to extract maximum equity cleanly

Worse when:

• You love your home and neighbours and don't want to move
• Selling and buying costs (real estate commissions, land transfer tax) eat into the gain
• The local market doesn't have suitable smaller properties
• Moving would disrupt established healthcare, social, and family connections

Downsizing is the most underrated alternative. The math often beats both HELOCs and reverse mortgages — but only if moving fits your life.

3. Sale-Leaseback

You sell your home to an investor and lease it back as a tenant. You get the equity in cash; they get a long-term tenant and the property's appreciation.

Better when:

• You want to extract 100% of equity in cash
• You're willing to give up ownership and heir inheritance
• You want to stay in the home you love

Worse when:

• You want to retain ownership and the option to leave the home to heirs
• You don't want to be a tenant (subject to lease terms, rent increases)
• You're not comfortable with private investor counterparties

This market is small in Canada compared to the US. Quality counterparties are limited. Proceed with significant legal advice.

4. Family Loans

Your adult children advance you funds against the eventual inheritance. Documented properly with a promissory note and registered against the home, this can be a legitimate option for families with sufficient liquidity.

Better when:

• Your kids have the means and willingness
• The family relationship is healthy and the documentation is professional
• You want maximum flexibility on rate and terms

Worse when:

• Family dynamics are strained or unequal between siblings
• Your kids don't have the liquidity
• The arrangement isn't properly documented (this is the biggest risk)

If you go this route, treat it like any other lending transaction. Lawyer drafts, registered mortgage on title, clear repayment terms.

5. Refinancing Your Existing Mortgage

If you have an existing mortgage with substantial equity, a traditional refinance might let you extract some equity at standard mortgage rates — much cheaper than a reverse mortgage.

Better when:

• You can qualify based on income and credit
• Your current rate is high and refinancing makes sense anyway
• You only need a moderate amount of equity (not the maximum)

Worse when:

• You can't qualify based on retirement income
• Monthly payments would strain your cash flow
• You need more equity than a regular mortgage will lend

How to Choose

The right choice depends on three things: whether you can qualify for traditional credit, whether you can comfortably make monthly payments, and how attached you are to staying in your current home.

If you can qualify and can afford payments: HELOC or refinance.

If you can't qualify and want to stay: reverse mortgage.

If you're flexible on location: downsizing usually wins on math.

We'll walk through all of these honestly in a free 15-minute call. If a reverse mortgage isn't your best option, we'll tell you that.