Amortization Schedule

Reading the Amortization Schedule

Each row shows one year: the opening balance, the interest accrued during that year, the closing balance, your projected home value, and your remaining equity (home value minus loan balance). Use this table to understand the long-term trajectory of your reverse mortgage.

Why the balance grows faster in later years

Because interest compounds on an ever-growing balance, the dollar amount of interest added each year increases over time even if the rate stays constant. In Year 1, interest on a $200,000 loan at 7% is approximately $14,000. In Year 10, after compounding, the same 7% rate generates approximately $27,000 in interest — on a balance that has grown to roughly $394,000. This is why starting with the smallest loan that meets your needs is the most cost-effective approach.

Semi-annual compounding under the Interest Act

Canadian law requires all mortgages to disclose and calculate interest using semi-annual compounding. The formula is: A = P(1 + r/2)^(2t). This means interest is calculated on the balance plus previously accrued interest every six months. The effective annual rate is slightly higher than the nominal rate — at 7% nominal, the effective annual rate is 7.1225%.

The no-negative-equity guarantee

In scenarios where the loan balance exceeds your projected home value, the amortization schedule will show negative equity. However, all four regulated Canadian reverse mortgage lenders guarantee that you (or your estate) will never owe more than the fair market value of your home at the time of sale. The lender absorbs any shortfall. This protection is called the no-negative-equity guarantee.

Dig deeper into the numbers

For a full explanation of how compounding works in Canadian reverse mortgages, read how reverse mortgages work. To see what these numbers mean for your estate, explore our estate impact projections. Rates vary significantly by lender — compare all five Canadian lenders to find the lowest rate for your situation.