A reverse mortgage may suit an eligible older homeowner who needs money from home equity but cannot or does not want to make regular loan payments; a HELOC may suit someone who can meet its payment terms and wants reusable credit. The trade-off is not just the interest rate: reverse-mortgage interest grows the debt over time, while HELOC interest applies to the amount drawn and its rate is usually variable. Compare the amount and timing of borrowing, fees, repayment obligations, rate risk and your plans for the home before choosing. The Financial Consumer Agency of Canada’s home-equity comparison sets out the general product differences.
How the two products differ
| Feature | Reverse mortgage | HELOC |
|---|---|---|
| Who may qualify | Usually a homeowner aged 55 or older; the home generally must be the primary residence. Age, property type and condition, appraised value and lender rules affect eligibility and the amount available. FCAC reverse-mortgage guidance. | The lender assesses the application and sets terms. The general limit is not a promise of approval. FCAC HELOC guidance. |
| General borrowing limit | FCAC says a reverse mortgage usually allows borrowing up to 55% of the home’s appraised or current value, with an existing mortgage balance affecting proceeds. The actual maximum depends on the borrower, home and lender. | FCAC lists a limit of 65% of the home’s appraised value. This is a general limit, not a personalized credit offer. |
| How funds are accessed | Depending on the product, funds may be available as a lump sum, regular payments or a combination. | Draw funds as needed through the available credit, subject to the agreement and credit limit. |
| How interest works | Interest is added to the loan balance, so the amount owed grows. FCAC says reverse-mortgage rates are usually higher than HELOC rates; available rate structures depend on the lender. | Interest is charged on amounts borrowed. Most HELOC rates are variable and commonly tied to the lender’s prime rate. |
| Payments and repayment | Regular loan payments are typically not required before repayment is due, but the contract still imposes obligations. FCAC lists moving out, selling the home, the last borrower’s death and default as repayment triggers. | Payments are required under the lender’s agreement. There is no single schedule that applies to every HELOC. |
| Possible costs | Appraisal, set-up, legal and closing fees may apply, as may prepayment penalties. | Appraisal, title search, title insurance and legal costs may apply. |
| Effect on home equity | Accumulated interest increases the balance and reduces the equity remaining in the home. | Borrowing also encumbers home equity; payments can manage the balance, but unpaid interest and further draws add to it. |
The limits and cost categories in the table are general guidance from FCAC, whose relevant pages are dated 2025-10-15. Actual eligibility, proceeds, rates, fees and contract terms vary by lender and borrower.
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How much could you borrow?
Reverse mortgage
FCAC’s general figure is up to 55% of appraised or current home value, but that is not the amount every applicant will receive. The lender’s calculation can depend on the age of each borrower, the home’s condition, type and appraised value, and lender rules. An existing mortgage or other secured debt may need to be paid off and closed; a lender may allow reverse-mortgage proceeds to cover it. The amount left for you to use can therefore be less than the gross amount available.
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FCAC gives a general HELOC limit of up to 65% of appraised home value. A lender must still assess the application and set an approved limit and agreement. Do not confuse this figure with FCAC’s separate limit of up to 80% for a home-equity loan: that is a different product, not the HELOC limit. See FCAC’s comparison of borrowing against home equity.
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How debt and payments behave over time
With a reverse mortgage, unpaid interest compounds into the balance
Because interest is added to the amount owed, the balance generally grows even if you take no additional advances. That can make a reverse mortgage easier to fit into a budget that cannot support regular loan payments, but it reduces the equity available later. Check the lender’s written projections for the balance over the period you expect to remain in the home, including the effect of the rate and any planned additional advances.
With a HELOC, draws and required payments shape the balance
You pay interest on what you borrow, rather than on the entire available credit limit. Most HELOC rates are variable, so the interest cost and required payment can rise if the rate rises; the agreement governs the actual payment requirements. FCAC’s HELOC page gives an illustration—not a current offer—in which a rate of prime plus 1 percentage point would be 6.85% when prime is 5.85%. Do not use that example as a current rate quote.
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When does repayment come due?
Reverse-mortgage triggers
FCAC says repayment is generally due when the borrower moves out, sells the home, the last borrower dies or the borrower defaults. The contract and lender rules determine the details, including what happens after a triggering event and how much time an estate may have to repay. Ask for those terms in writing before signing.
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HELOC payment terms
A HELOC has required payments under its own agreement. Ask the lender how payments are calculated, when they are due, how the rate can change and what events could require repayment or affect continued access to credit. Do not assume another lender’s schedule or payment rules apply to your offer.
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Fees, existing debt and restrictions to check
Compare the full cost of setting up and keeping each option, not only its advertised rate. A reverse mortgage may involve appraisal, set-up, legal and closing fees and a prepayment penalty. For a HELOC, FCAC identifies appraisal, title search, title insurance and legal costs as possible expenses. The specific charges depend on the lender and transaction.
If the home already secures a mortgage or line of credit, ask whether it must be paid off and closed, whether proceeds can cover that balance, and how the arrangement affects your ability to secure other borrowing against the property. Reverse-mortgage terms may limit additional financing secured against the home. Request a written breakdown of net proceeds after any payoff and fees.
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- CONFIDENTLY AND EASILY SOLVE: Clients' financial questions whether they're buyers, sellers, investors or renters. Increase your perceived professionalism as a new agent, experienced broker or seasoned loan officer. Close more home sales and impress your clients with fast, accurate answers to all their real estate finance questions from PITI Payments to IRR, NPV and Cashflows
- DEDICATED BUYER QUALIFYING KEYS: Enter client's income, debt and expenses to pre-qualify them to only show properties they can afford. Include tax, insurance and mortgage insurance then compare loan options and payment solutions to give your client choices before they make an offer to buy
- FIGURE OUT THE RIGHT LOAN: For your client at the press of a button for jumbo, conventional, FHA/VA, or even 80:10:10 or 80:15:5 combo loans; check to see if ARMs or bi-weekly loans, quarterly payments or if interest-only payments are the answer; giving your client more choices; easily perform what if loan or TVM calculations find loan amount, term, interest or PITI or PI payments
- BECOME AN INVALUABLE RESOURCE: To your clients by reducing their confusion and uncertainty; ensuring they are able to make a purchase offer; knowing they can afford the down payment; and determining which is the right loan for them. Date-math for listings and contracts too. Comes with a protective slide cover, quick reference guide, pocket user's guide, and long-life battery
How to compare the numbers fairly
There is no universal break-even point or winner: the result depends on the borrower’s actual quote, draw schedule, rate path, fees and time in the home. To make an apples-to-apples comparison, use the same assumptions for both products.
- Set the same starting facts. Use the same property value, existing secured debt, cash amount needed and expected timing of the borrowing.
- Get written terms from lenders. Record the approved amount, how funds are accessed, interest-rate structure, payment obligations, all fees, prepayment terms and events that trigger repayment.
- Model the borrowing schedule. For a HELOC, include when funds are drawn, required payments and more than one plausible variable-rate path. For a reverse mortgage, include the advance schedule and how interest is added to the balance.
- Compare at the same future dates. Estimate the amount still owed at the time horizon you are considering, then subtract it and any other secured debt from the same estimated home value to compare remaining equity. Treat the result as an estimate, not a guaranteed sale value or lender payoff figure.
- Check the cash-flow fit. Confirm whether you can afford required HELOC payments if rates rise, and whether a reverse mortgage’s growing balance is acceptable given your plans for the property and estate.
A lender’s current written quote is essential for a meaningful cost estimate. FCAC’s illustrative HELOC rate does not establish today’s rate, and the general borrowing limits do not determine an individual’s approved amount.
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How the choice affects a home and estate
FCAC says reverse-mortgage proceeds are not taxable and do not affect Old Age Security or Guaranteed Income Supplement benefits. That is FCAC’s general treatment; check your own circumstances with a qualified tax or financial professional. Interest accumulation can leave less home equity for beneficiaries. The estate may need to repay the loan under the contract’s timelines and conditions.
A HELOC also uses home equity as security. Regular payments can help manage its balance, but outstanding draws and interest remain debt against the property. Consider who would be responsible for payments and repayment if your circumstances change, and discuss the contract with a qualified legal or financial professional when needed.
Which option may fit your situation?
A reverse mortgage may be worth investigating if
- You meet the lender’s age and property requirements.
- You need access to home equity but regular loan payments would strain your cash flow.
- You understand that interest added to the balance reduces future equity and have reviewed the repayment triggers and estate implications.
A HELOC may be worth investigating if
- You want to draw funds as needed rather than receive a single advance.
- You can meet the payments in the agreement and can manage the possibility of variable-rate increases.
- You want to compare the cost of borrowing only the amounts actually drawn, while accounting for fees and the lender’s terms.
These are decision factors, not a qualification or recommendation. A lender quote and advice based on your full circumstances are needed to decide what is suitable.
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