Downsizing vs Reverse Mortgage

Why Downsizing Isn't Always the Cheaper Option

Downsizing is often the first idea that comes up when retirees think about unlocking home equity — and it can absolutely be the right move. But the headline equity figure (current value minus new purchase price) is never what actually lands in your bank account. This calculator walks through every real cost so you can compare apples to apples with a reverse mortgage.

The costs this calculator includes

Selling costs: realtor commission in Canada typically runs 4–6% of the sale price, including HST. We default to 5% — adjust it to match what your local agent has quoted you. Land transfer tax (LTT): every province calculates this differently. Ontario uses marginal bands from 0.5% to 2.5%; British Columbia's Property Transfer Tax scales from 1% to 5% on luxury properties; Alberta has essentially no LTT (nominal title fees only); Quebec's "welcome tax" is municipal with rates around 0.5%–1.5%. This calculator uses approximate provincial-level estimates — your municipality may vary slightly. Toronto buyers pay an additional Municipal LTT that effectively doubles the provincial figure. Legal and moving costs: we use a flat $3,500 assumption covering lawyer fees for the purchase, title insurance, movers, and incidentals. Your mileage may vary based on distance and lawyer rates.

What the reverse mortgage side assumes

The reverse mortgage comparison uses the estimated loan-to-value (LTV) that a lender like CHIP would extend at your age. LTV rises from roughly 15% at age 55 to 55% by mid-80s. We subtract your existing mortgage balance (since it must be discharged with the proceeds) to show the net tax-free cash. We do not include setup fees in this headline figure — those run $995–$2,995 depending on the lender and are covered in our cost estimator.

The hidden tradeoffs the numbers don't show

Downsizing ends your ownership of the current home permanently. If the neighbourhood continues appreciating, you miss that upside. Moving in your 70s or 80s is also genuinely disruptive — many retirees underestimate the emotional and physical toll, especially when leaving a home of 30+ years. A reverse mortgage preserves ownership and lets you age in place, but interest compounds on the balance (semi-annually, as required by the Canadian Interest Act), and the estate inherits less. Neither option is universally better — it depends on what you value.

When downsizing genuinely wins

If your current home is oversized for your needs, expensive to maintain, or in a neighbourhood you no longer want to live in, downsizing often produces the better lifestyle outcome even when the cash math is similar. It also wins clearly when the price gap between current and target home is very large (say, a $1.5M home to a $500K condo) — the fee drag is smaller as a percentage of freed equity.

When a reverse mortgage wins

If you love where you live, have strong family or community ties, or the downsizing math barely beats a reverse mortgage after all costs, staying put usually wins. It's also the clearer choice if the equity need is modest (e.g., $100K–$200K) rather than the full equity value — a reverse mortgage lets you draw only what you need. See our full alternatives guide for other equity-access paths.