Reverse Mortgage vs HELOC in Canada: Which Is Right for You?

If you're a Canadian homeowner over 55 looking to access your home equity, you've probably heard of two main options: a reverse mortgage and a Home Equity Line of Credit (HELOC). Both let you borrow against your home — but they work very differently, and the right choice depends entirely on your situation.

The Five-Second Summary

If you can comfortably make monthly payments and qualify based on your income, a HELOC is almost always cheaper. If you can't qualify or don't want monthly payment pressure, a reverse mortgage is purpose-built for your situation.

Now let's look at why.

Qualification: Income vs. Age

HELOCs require traditional underwriting. The bank looks at your income, employment, debt ratios, and credit score. For a retiree on CPP, OAS, and a small pension, this often means rejection — even with $800,000 of equity in a paid-off home. Banks don't care about your equity if they can't see how you'll make the monthly payments.

Reverse mortgages flip this on its head. The lender qualifies you based on your age (55+) and your home's value. Your income, employment status, and credit are largely irrelevant. This is why reverse mortgages exist as a product — they're designed specifically for people who can't qualify for a HELOC despite owning substantial equity.

Monthly Payments: $0 vs. Required

A HELOC requires monthly interest payments, usually at prime + 0.5% to 1.5%. Skip a payment and you're in default. Skip several and the bank can demand repayment of the full balance. For someone on a fixed income, this creates real pressure.

A reverse mortgage requires zero monthly payments. Interest accrues and is added to the loan balance, which is repaid when you sell, move, or pass away. The tradeoff: interest compounds over time, so the balance grows faster than a HELOC where you're paying interest as you go.

Interest Rates: HELOC Wins

HELOC rates in late 2025 ranged from approximately 6%–7.5% (prime + 0.5–1.5%). Reverse mortgage rates ranged from approximately 7%–9%. The gap reflects the lender's risk profile — they wait years or decades to be repaid on a reverse mortgage.

On a $200,000 balance over 10 years, this difference can mean an extra $30,000–$60,000 in interest. That's not trivial.

How the Math Plays Out Over Time

Let's compare a $200,000 HELOC at 7% (with interest-only payments) to a $200,000 reverse mortgage at 8% (no payments) over 15 years:

• HELOC: Balance stays at $200,000. You've paid $210,000 in interest over 15 years. Total cost: $210,000.
• Reverse mortgage: Balance compounds to approximately $635,000. You've paid nothing. Total cost: $435,000.

The reverse mortgage costs roughly $225,000 more in this scenario — but you also kept that $210,000 in HELOC interest in your bank account, earning income, for 15 years. The actual gap depends on what you would have done with that money.

When the Reverse Mortgage Math Actually Wins

The reverse mortgage looks worse on paper but can win in practice when:

• You can't qualify for the HELOC at all
• The HELOC payments would force you to draw from RRIFs or investments earlier (triggering taxes and reducing growth)
• You'd be forced to sell your home without the reverse mortgage
• You plan to use the funds for at least 10 years, making the no-payment benefit substantial

The Honest Recommendation

If you can qualify for a HELOC and comfortably afford the payments without disrupting your retirement plan, take the HELOC. It's almost always cheaper.

If you can't qualify, or the payments would create financial stress, or you want to fully decouple from monthly debt service in retirement — that's exactly what a reverse mortgage is designed for.

The wrong question is "which is better." The right question is "which fits my situation." We can help you figure that out in a free 15-minute call.