Using a reverse mortgage to pay off your mortgage
You can use a reverse mortgage to pay off your existing mortgage, which must be cleared first anyway. It ends your monthly payment but starts compounding interest on the full amount, so it suits people who can't keep up payments more than people who simply want them gone.
Figures as of November 1, 2026.It's one of the most common reasons Canadians take a reverse mortgage: the existing mortgage must be paid off first anyway, and the monthly payment disappears. On a $220,000 mortgage the saving is about $1,678 a month (at 4.5% over 15 years). The cost: the $220,000 plus fees then compounds at 6.49% and above, to about $574,719 by age 80 for a 66-year-old.
How the payoff works
At closing the lender pays your existing mortgage or HELOC directly, deducts its fee, and pays you any balance (CHIP's minimum initial advance is $25,000). From then on there's no payment. HomeEquity Bank's closing fee covers discharging the prior mortgage. If your current mortgage has a prepayment penalty, that's paid too, so ask your current lender for a payout statement first.
The numbers
| Age | Reverse mortgage owed | Home value | Left after selling costs |
|---|---|---|---|
| 66 | $223,070 | $900,000 | $631,930 |
| 70 | $288,001 | $1,012,958 | $674,309 |
| 75 | $405,662 | $1,174,296 | $709,919 |
| 80 | $574,719 | $1,361,331 | $718,545 |
| 85 | $814,230 | $1,578,155 | $685,018 |
| 90 | $1,153,555 | $1,829,515 | $584,483 |
Keeping the old mortgage instead would cost about $1,678 a month for 15 years at 4.5%, and it would be gone by 81. Clearing it with a reverse mortgage frees that cash flow but leaves a much larger debt at 81.
Will the reverse mortgage cover it?
The estimated maximum must exceed the mortgage plus about $3,070 in costs. At 66 our estimate is about 37% of value, so a $900,000 home supports roughly $333,000. A 60-year-old with a $500,000 home (about 28%, $140,000) couldn't clear a $220,000 mortgage. Check yours in the amount calculator.
Other ways to clear a mortgage
- Renew with a longer amortization to lower the payment, if you qualify.
- A HELOC at about 5.20%, interest-only, if you can pass the stress test (at least 5.25%).
- Downsize, clearing the mortgage and freeing cash.
- Family help, documented properly with a lawyer.
What if you kept paying the mortgage instead?
| Keep paying (15 years) | Reverse mortgage (CHIP) | |
|---|---|---|
| Monthly payment | $1,687 | $0 |
| Owed at 81 | $0 | $616,189 |
| Owed at 90 | $0 | $1,153,555 |
The payment uses the Bank of Canada's 4.58% average for new uninsured 5-year-plus mortgages (2026-08) over 15 years; your renewal rate will differ. The reverse mortgage frees $1,687 a month, and by 90 the price of that freedom is $1,153,555 owed.
What are the alternatives?
- Renew with a longer amortization to lower the payment while still paying the loan down. You'll need to qualify.
- A HELOC for part of the balance, if your income qualifies; its interest is lower than a reverse mortgage's.
- Downsize and clear the mortgage from the sale.
- A reverse mortgage when payments are no longer manageable and you want to stay.
RefinanceCalculator.ca prices a regular refinance, and the comparison here shows the reverse-mortgage, HELOC and downsizing routes side by side.
| Mortgage paid off | $220,000 |
|---|---|
| Product | CHIP6.49% |
| Owed at 75 | $405,662 |
| Owed at 85 | $814,230 |
| Left at 90 | $584,483home grown 3% a year |
Open this example in the calculator →Computed by our engine with the lender terms and rules on the methodology page.Computed November 1, 2026.
What this means for you
If you can afford the payment, keeping it usually leaves far more. If the payment is a strain, compare refinancing or a HELOC first; then a reverse mortgage.
Frequently asked questions
Can I get a reverse mortgage if I still have a mortgage?
Yes, as long as the reverse mortgage pays it off at closing. HomeEquity Bank and EQ Bank both require this so the reverse mortgage is registered in first position.
Is it smart to pay off a mortgage with a reverse mortgage?
It removes a payment you may not be able to afford, but you trade a lower-rate amortizing debt for a higher-rate growing one. It makes most sense if the payment is unaffordable and a cheaper refinance or downsizing isn't.
Primary sources
- HomeEquity Bank — CHIP Reverse Mortgage: eligibility and closing fee. Checked .
- EQ Bank (Equitable Bank) — Reverse mortgage FAQ. Checked .
- HomeEquity Bank — CHIP Reverse Mortgage rates (special rates as of October 29, 2026) (effective October 29, 2026). Checked .
- HomeEquity Bank — CHIP posted rates (applicable upon reset). Checked .
- OSFI — Minimum qualifying rate for uninsured mortgages (effective January 29, 2026). Checked .