Squeezed from both sides
A lot of Edmonton-area homeowners in their late 50s, 60s and early 70s are in the middle of what’s often called the sandwich generation. A parent in Mill Woods or St. Albert needs more help than they did five years ago. A son or daughter is trying to get started in Leduc or Spruce Grove. And somewhere in there is your own retirement plan, the one you’ve worked decades for.
Often the biggest thing you own is the house you’ve paid down over the years. A reverse mortgage is one way some homeowners 55 and older turn part of that equity into cash without selling or moving. It can be a useful tool. It also has real costs, and it affects what’s left for your family later. This guide walks through both sides.
How a reverse mortgage works, in plain terms
- For homeowners 55+. The home is usually your primary residence, and you keep owning it.
- Usually up to 55% of your home’s value. The amount depends on your age (and the age of anyone else on title), the home’s type, condition and appraised value, and the lender.
- No required regular payments while you live in the home.
- Interest accrues. Instead of being paid monthly, interest is added to the balance, so what you owe grows over time.
- Repaid later: when you sell, move out, or the last borrower passes away.
- You still carry the house. Property taxes, home insurance and upkeep remain your responsibility.
You may be able to take the money as one lump sum, part up front and the rest over time, or as regular advances. Each choice changes how much interest builds up, so it’s worth matching the amount to what you actually need.
Where the money tends to go in a sandwich-generation family
Your parents
Help with in-home care, a move to supportive living, or changes that make their place safer, such as a main-floor bathroom or grab bars.
You
Breathing room in retirement: covering costs without drawing down your savings as fast, paying off debt, or renovating so you can stay in your own home longer.
Your adult kids
A head start, such as help toward a first home in Beaumont or Fort Saskatchewan, or getting through a tight stretch, while you’re around to see it.
The common thread is choice and control: deciding how and when your home equity helps the people you care about, instead of waiting until the house is sold. That said, helping family is generous, not mandatory. Your own retirement still has to work, possibly for 25 or 30 more years.
The costs and trade-offs, honestly
- Interest builds on interest. With no payments going in, the balance grows every year, and the longer it runs, the faster it climbs.
- It costs more than a regular mortgage. Reverse mortgage interest rates are usually higher than a regular mortgage or a home equity line of credit (HELOC), and there can be appraisal, legal, set-up and closing costs.
- Less equity for later. What you borrow, plus interest, comes out of your home’s value, leaving less for you if you move later and less for your heirs.
- Paying it off early can cost you. If you sell or repay sooner than planned, prepayment penalties may apply.
- Your estate has a deadline. After the last borrower passes away, the estate usually has a limited time to repay, and settling an estate can take longer than expected.
- It can limit other borrowing. An existing mortgage or HELOC usually has to be paid off, and you may not be able to add another loan secured by the home.
Before you decide: talk it over with your family and get independent legal advice from your own lawyer. It isn’t the right fit for everyone, and another option may suit you better.
Other options worth comparing
A reverse mortgage is one tool, not the only one. Depending on your income, your plans and how long you want to stay in the house, it’s worth putting these side by side:
- A home equity line of credit (HELOC): usually a lower rate, but you have to qualify on income and credit and make monthly payments. See my reverse mortgage vs HELOC comparison.
- A refinance: can make sense if you can comfortably carry a payment.
- Downsizing or renting: selling and moving somewhere smaller frees equity without a loan, but it means leaving the home.
Questions to settle as a family first
What exactly is the money for, and how much is enough?
Borrowing only what you need, when you need it, keeps the interest down.
Is the help fair to everyone?
If one child gets help now, how does that sit with siblings when the estate is settled? Saying it out loud now avoids hard feelings later.
How long do you plan to stay in the home?
The longer it runs, the more the balance grows. If a move is likely within a few years, other options may cost less.
Does your plan still work if you need care yourself?
Leave room in your equity for your own later years, not just the next few.
Have you had independent legal advice?
Your own lawyer can explain the contract, what happens to the home and what your estate would owe. Your accountant or financial planner can speak to the tax side.
You can see everything else I help with on the mortgage services page.
Fully online, anywhere in the Edmonton area
Whether you live in Edmonton, St. Albert, Sherwood Park, Spruce Grove, Leduc, Beaumont, Fort Saskatchewan or elsewhere in the region, we can do the whole thing from your kitchen table: video meetings, phone calls, e-signing and secure document upload. Your kids or siblings can join the same call from wherever they live, so everyone hears the same thing. See how an online mortgage works and the communities I serve.
John Antle, Sub Mortgage Broker - Team Lead, Pineapple National Inc.
General information only, not personalized financial or mortgage advice. Speak with a licensed mortgage professional about your situation. Amounts, rates and fees vary by lender. Approval not guaranteed. O.A.C.
Sources: Financial Consumer Agency of Canada, “Reverse mortgages” (opens in a new tab); Pineapple, “What is a Reverse Mortgage?” (opens in a new tab).