Primary Residence
The home where you live for the majority of the year. Every Canadian reverse mortgage requires the property to be your primary residence. Rental properties, vacation homes, and investment properties do not qualify.
Reference
Reverse Mortgage Glossary
Plain-language definitions of every term you will encounter when researching or applying for a reverse mortgage in Canada.
Reverse mortgages come with their own vocabulary. This glossary covers the key terms you will see throughout our education guides, lender comparisons, and calculators — all explained in plain language for the Canadian context.
Appraisal
A professional assessment of your home's current market value, conducted by a certified appraiser. Every reverse mortgage requires an appraisal to determine how much you can borrow. The cost is typically $300–$500, and some lenders cover it.
Borrower
The homeowner(s) who take out the reverse mortgage. All borrowers must be at least 55 years old (except Fraction, which requires age 18+) and must live in the home as their primary residence. If there are two borrowers on title, both must meet the age requirement.
Commitment Letter
A formal document from the lender confirming the reverse mortgage terms — including the approved loan amount, interest rate, fees, and conditions. You receive this after your application is approved and the appraisal is complete. You must review it carefully before signing.
Compound Interest
Interest calculated on both the original loan amount and any previously accumulated interest. Canadian reverse mortgages use semi-annual compounding — interest is calculated and added to the loan balance twice per year. Because you make no monthly payments, the balance grows over time as interest compounds on interest.
CPP (Canada Pension Plan)
A government pension program that provides retirement income to eligible Canadians. Reverse mortgage funds are a loan advance, not income, and do not affect your CPP payments or eligibility.
Discharge
The legal process of removing the reverse mortgage from your property's title after the loan is fully repaid. This occurs when you sell your home, repay the loan voluntarily, or the estate settles the debt after the borrower passes away.
Equity
The difference between your home's current market value and any outstanding debts secured against it (mortgages, HELOCs, etc.). For example, if your home is worth $800,000 and you owe $100,000 on a mortgage, your equity is $700,000. A reverse mortgage allows you to access a portion of this equity.
FSRA
The Financial Services Regulatory Authority of Ontario. FSRA regulates mortgage brokers and agents in Ontario. All licensed mortgage professionals who arrange reverse mortgages in Ontario must be registered with FSRA.
GIS (Guaranteed Income Supplement)
A monthly non-taxable benefit paid to low-income OAS recipients. Because reverse mortgage funds are a loan advance and not income, they are not included in the income calculation used to determine GIS eligibility. This is a key advantage for lower-income retirees who depend on GIS.
HELOC (Home Equity Line of Credit)
A revolving credit line secured against your home. Unlike a reverse mortgage, a HELOC requires income qualification and monthly interest payments. HELOCs can also be frozen or reduced by the lender at any time. Under OSFI guidelines, you can borrow up to 65% of your home's value through a HELOC.
Home Equity
See Equity.
ILA (Independent Legal Advice)
A mandatory requirement for all Canadian reverse mortgages. You must meet privately with a lawyer (or notary in Quebec) who is not connected to the lender. The lawyer ensures you fully understand the loan terms, your obligations, and the impact on your estate. The cost is typically $300–$700 and is paid by the borrower.
Interest Rate
The annual percentage charged on your reverse mortgage balance. Canadian reverse mortgage rates are typically 1% to 3% higher than conventional mortgage rates due to the deferred repayment structure and no-negative-equity guarantee. Most lenders offer fixed rates for terms of 1 to 5 years. Bloom Finance also offers a unique lifetime fixed rate.
Loan-to-Value Ratio (LTV)
The percentage of your home's appraised value that you can borrow. For reverse mortgages, LTV ranges from approximately 15% (for younger borrowers) to 55% (for older borrowers). Your age is the primary factor — the older you are, the higher the LTV available.
Lump Sum
Receiving the full reverse mortgage amount as a single payment at closing. This is the most common payout option and is available from all five Canadian lenders. The alternative is scheduled advances (available from CHIP) or a Prepaid Mastercard (available from Bloom).
No-Negative-Equity Guarantee
A contractual guarantee included in every Canadian reverse mortgage that ensures the borrower (or their estate) will never owe more than the fair market value of the home at the time of repayment. If the loan balance exceeds the home's value — for example, due to a severe market downturn — the lender absorbs the loss.
OAS (Old Age Security)
A monthly government pension available to Canadians aged 65 and older who meet residency requirements. OAS is subject to a clawback (recovery tax) if your net income exceeds a certain threshold. Because reverse mortgage funds are not income, they do not trigger OAS clawbacks — unlike RRSP/RRIF withdrawals.
OSFI
The Office of the Superintendent of Financial Institutions. OSFI regulates federally regulated financial institutions in Canada, including banks that offer reverse mortgages (such as HomeEquity Bank and Equitable Bank). OSFI sets rules around lending practices, including the mortgage stress test for conventional mortgages.
Prepayment Penalty
A fee charged by the lender if you repay the reverse mortgage before the end of the term. Penalties vary by lender and product. CHIP Open has no prepayment penalty within the first 6 months. Other products use an Interest Rate Differential (IRD) calculation similar to conventional mortgages.
Reverse Mortgage
A loan secured against a Canadian residential property that allows homeowners aged 55+ to access a portion of their home equity without making monthly payments. The loan (plus accrued interest) is repaid when the borrower sells, moves out permanently, or passes away. Canada has five reverse mortgage lenders: CHIP (HomeEquity Bank), Equitable Bank (Flex), Bloom Finance, Home Trust (EquityAccess), and Fraction.
Scheduled Advances
Regular payments from a reverse mortgage deposited into your bank account on a set schedule (monthly, quarterly, etc.) rather than as a single lump sum. CHIP's Income Advantage product is the primary Canadian option for scheduled advances.
Semi-Annual Compounding
The method used to calculate interest on Canadian reverse mortgages (and conventional Canadian mortgages). Interest is calculated and added to the loan balance twice per year. This means interest accrues on previously accumulated interest every six months.
Setup Fee
A one-time fee charged by the lender to process and administer the reverse mortgage. Also called an administration fee, origination fee, or closing fee. Ranges from $995 (Equitable Bank, Home Trust) to approximately $2,995 (CHIP) depending on the lender and product.
Stress Test
A federal regulation (administered by OSFI) that requires borrowers to qualify for a conventional mortgage at a rate higher than the actual contract rate — typically the contract rate plus 2% or the Bank of Canada's qualifying rate, whichever is higher. Reverse mortgages do not require a stress test, which is why they are accessible to retirees who cannot qualify for conventional financing.
Title
The legal ownership record of a property. A reverse mortgage is registered as a charge (lien) against your property title — similar to a conventional mortgage. You retain full ownership of the property throughout the life of the reverse mortgage.
Still have questions?
If a term is not covered here, or you want to understand how these concepts apply to your specific situation:
- Read our FAQ — answers to the 20 most common questions about Canadian reverse mortgages
- Browse the education hub — 7 in-depth guides covering everything from eligibility to estate impact
- Book a free consultation — talk to a licensed reverse mortgage broker who can answer your questions directly
Ready to See What You Qualify For?
Get a free, no-obligation estimate. Or speak with a licensed broker who specializes in reverse mortgages.