For Canadian homeowners 55+, a HELOC and a reverse mortgage both unlock home equity — but they work very differently. A HELOC is a revolving line of credit with monthly interest payments and strict income qualification. A reverse mortgage requires no monthly payments, no income test, and cannot be called by the lender while you live in your home. The right choice depends on your cash flow, qualification status, and how long you plan to stay.
| Feature | Reverse Mortgage | HELOC |
|---|---|---|
| Minimum age | 55+ (all borrowers on title) | No age minimum |
| Income required | No | Yes — stress-tested |
| Monthly payments | None required | Interest (often principal too) |
| Typical interest rate | ~6.44%–7.29% fixed | ~Prime + 0.5%–1.5% (often lower) |
| Can lender call the loan? | No (while you occupy the home) | Yes — limit can be cut or cancelled |
| Affects OAS / GIS | No — proceeds are a loan, not income | No — but payments reduce cash flow |
| Best for | Retirees who cannot qualify for a HELOC or need payment-free cash flow | Homeowners with strong income who can afford monthly payments |
When a HELOC is the better choice
A HELOC usually wins on cost if you still qualify. Interest rates are typically lower than reverse mortgage rates, and you only pay interest on what you draw. If you have pension income, RRIF withdrawals, or other steady cash flow that passes the bank's stress test, a HELOC can fund renovations, debt consolidation, or short-term needs at lower cost.
HELOCs also preserve more equity over time when you make regular interest payments instead of letting interest compound unpaid. If you expect to repay the balance within five to ten years — for example, after selling an investment property or receiving an inheritance — a HELOC's lower rate can save thousands.
When a reverse mortgage is the better choice
A reverse mortgage makes sense when a HELOC is not available or not sustainable. Common scenarios: you were declined for a HELOC because of insufficient income, your bank reduced your line of credit at renewal, monthly interest payments would strain your retirement budget, or you need tax-free funds without triggering OAS clawback from large RRIF withdrawals.
Reverse mortgages also suit homeowners who want certainty. Your lender cannot demand repayment while you live in the home, maintain it, and pay property taxes and insurance. For many Canadians 55+, that payment-free structure is the difference between staying home and being forced to sell.
The hidden HELOC risk in retirement
Banks reassess HELOCs at renewal — typically every one to five years. If your income drops, your home value falls, or the bank tightens lending standards, your limit can shrink or disappear entirely. During the 2008–2009 financial crisis and again in 2020, many Canadian retirees saw HELOC limits cut with little notice. A reverse mortgage does not carry this renewal risk in the same way; the loan amount is set at origination based on age and home value.
Cost comparison over 10–20 years
On paper, HELOCs look cheaper because rates are lower. But unpaid HELOC interest still compounds if you only make minimum payments — and mandatory monthly payments can force RRIF withdrawals that trigger OAS clawback. Reverse mortgage interest is higher, but the no-payment structure preserves monthly cash flow and government benefits.
Run your specific numbers with our HELOC vs reverse mortgage calculator — it models monthly payments, total interest, and qualification requirements side by side. Then compare long-term equity impact with the equity projection calculator.
Can you have both?
Generally no — reverse mortgage lenders require the reverse mortgage to be the primary charge on title, which means any existing HELOC must be paid out at closing. If you have a small HELOC balance, rolling it into a reverse mortgage advance is a common strategy. See our alternatives guide for other options including downsizing and property tax deferral.