Understanding Reverse Mortgage Interest Rates in Canada

Interest rates are the number-one concern for most Canadians considering a reverse mortgage. The rates are higher than a conventional mortgage — and understanding why, and how compounding works, is essential to making an informed decision.

Current Reverse Mortgage Rates in Canada

As of early 2026, five-year fixed reverse mortgage rates in Canada range from approximately 6.44% (Equitable Bank Flex Lite) to 7.29% (CHIP Income Advantage). Here is a general overview by lender:

• Equitable Bank Flex: Typically offers the lowest rates in the market. Their Flex Lite product has the lowest rate but requires a higher minimum home value.
• CHIP (HomeEquity Bank): Canada’s largest reverse mortgage lender. Rates vary across their four products — CHIP, CHIP Max, CHIP Open, and Income Advantage.
• Bloom Finance: Unique in offering a lifetime fixed rate that never changes for the life of the loan, regardless of market conditions.
• Home Trust: Competitive rates with lower setup fees. Broker-exclusive, available in Ontario, BC, Alberta, and Nova Scotia.
• Fraction: A shared-appreciation alternative with a different rate structure. Not technically a reverse mortgage, but serves a similar purpose.

For the most current rates and a side-by-side breakdown, visit our lender comparison page.

Why Are Reverse Mortgage Rates Higher?

Reverse mortgage rates are typically 1% to 3% higher than conventional mortgage rates. There are concrete reasons for this:

No monthly payments. With a conventional mortgage, the lender receives cash flow every month — both principal and interest. With a reverse mortgage, the lender receives nothing until the home is sold or the borrower passes away. This can be 10, 15, or even 25 years. The lender must fund the loan today and wait years for repayment.

Compounding risk. Because interest is not being paid, it compounds — interest accrues on top of interest. The longer the loan runs, the larger the balance grows relative to the home’s value. The lender takes on the risk that the loan balance could approach or exceed the home’s value, especially in a flat or declining real estate market.

No-negative-equity guarantee. Every Canadian reverse mortgage includes a guarantee that borrowers (or their estates) will never owe more than the fair market value of the home. If the loan balance exceeds the home’s value, the lender absorbs the loss. This guarantee has a cost, and it is built into the rate. Learn more about this protection in our myths vs. facts guide.

Smaller market. The Canadian reverse mortgage market is much smaller than the conventional mortgage market. Fewer lenders means less competition, which keeps rates higher than they might otherwise be.

How Semi-Annual Compounding Works

All Canadian reverse mortgages use semi-annual compounding — interest is calculated and added to the loan balance twice per year. This is the same compounding method used by conventional Canadian mortgages.

Here is a simplified example: if you borrow $150,000 at a 6.75% annual rate, your balance after one year would be approximately $160,200. After five years, approximately $209,000. After ten years, approximately $291,000.

The key insight is that the balance grows faster in later years because the compounding base is larger. Our amortization calculator shows you the exact year-by-year breakdown for any loan amount and rate.

How to Get the Best Rate

Several factors affect the rate you will actually receive:

1. Choose the right lender. Rates vary significantly between lenders and products. Equitable Bank consistently offers the lowest rates, but they are only available in BC, Alberta, Ontario, and Quebec, and require a broker. Use our lender comparison to see all options.

2. Loan-to-value ratio. Some lenders offer better rates if you borrow a smaller percentage of your home’s value. Borrowing 20% of your equity may get you a lower rate than borrowing 40%.

3. Work with a broker. Brokers have access to all five lenders and can negotiate on your behalf. Two of the five Canadian reverse mortgage lenders — Equitable Bank and Home Trust — are only available through brokers. Book a free consultation to compare offers.

4. Consider the total cost. The interest rate is important, but setup fees, appraisal costs, and prepayment flexibility all factor into the total cost of the loan. Our cost estimator calculates the all-in cost by lender.

The Rate Is Only Part of the Picture

While rates matter, they are not the only factor — and sometimes not even the most important one. A lower rate from a lender with higher fees may cost you more overall. A lender with a higher rate but better flexibility (like Bloom’s optional interest payments or CHIP Open’s no-penalty prepayment) may save you money depending on your plans.

The best approach is to compare all five lenders across rates, fees, and features, and then talk to a licensed broker who can recommend the best fit for your specific situation.

Use our equity projection calculator to see how different rates affect your home equity over 5, 10, or 20 years.