How does a reverse mortgage grow over time?
With no payments, interest is added to the balance, so the amount you owe grows each year. At 7% interest, a reverse mortgage roughly doubles in about 10 years. If your home also rises in value, you can still keep a good share of your equity.
Owed after 15 years—Including — in interest
Home value then—
Equity you keep—
Home value and loan balance
| Year | Owed | Home value | Your equity |
|---|
Interest is compounded semi-annually, as is standard for Canadian mortgages. Real rates change when your term renews.
Ways to slow the growth
- Borrow only what you need. Taking money in stages means you pay interest on less. Try the lump sum vs monthly advances calculator.
- Make optional payments. You never have to, but many lenders let you pay some interest each year without a penalty.
- Compare rates. A small rate difference adds up over 10 or 20 years.
Questions about loan growth
Can I owe more than my home is worth?
Canadian reverse mortgage lenders generally guarantee that, as long as you meet the loan terms, the amount owed won't exceed the home's fair market value when it's sold. Confirm the exact terms with your agent.
Is the interest rate fixed?
You can usually choose a fixed rate for a set term, such as 1, 3 or 5 years, or a variable rate. When a fixed term ends, the loan renews at the rate available then.