Senior Mortgage Options in Canada (2026): HELOC, Reverse Mortgage, Refi, and Downsizing Compared

If you are 55 or older and sitting on a paid-off (or nearly paid-off) home, you have more equity-access options than at any other point in your life — and four of them work very differently. Here is the plain-English comparison of reverse mortgages, HELOCs, conventional refinancing, and downsizing for Canadian seniors in 2026.

Quick Comparison

Option 1 — Reverse Mortgage (CHIP / Equitable Bank)

How it works. You borrow a lump sum or line of credit against your home with no monthly payments. Interest accrues and is paid when you sell, move out, or pass away.

Pros:

• Zero monthly payment — useful if you are cash-flow constrained but equity-rich
• No qualification on income
• You retain title and ownership
• Tax-free draws

Cons:

• Higher rate (~7.50%-8.50% vs 4.30% conventional)
• Compounds aggressively — a $200K reverse mortgage at 8% balloons to ~$432K in 10 years if untouched
• Erodes inheritance and future downsizing proceeds
• Can be hard to refinance out of later

Best fit: A homeowner aged 70+ who plans to stay in the home for 5-10 more years, has limited income, and is comfortable leaving less to heirs.

Option 2 — HELOC (Home Equity Line of Credit)

How it works. A revolving credit line secured against your home, drawable up to 65% of value (Canadian regulatory cap). Interest-only minimum payment.

Pros:

• Far cheaper than reverse mortgage (~5.95%-6.45% in 2026)
• Pay interest only on what you draw
• Re-borrow as you repay
• No prepayment penalties

Cons:

• Requires income to qualify (GDS/TDS apply, plus stress test)
• Variable rate — payment rises with prime
• Lender can demand repayment in certain circumstances
• Discipline required — easy to overuse

Best fit: A senior with steady pension income who wants flexible, cheap access to equity for renovations, medical costs, or family support.

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Option 3 — Conventional Refinance

How it works. Replace your existing mortgage (or take a new one) up to 80% of home value, on standard amortizing terms.

Pros:

• Cheapest option (~4.30%-4.80% in 2026)
• Predictable, fixed payment if you choose a fixed-rate term
• Up to 30-year amortization for uninsured mortgages

Cons:

• Income required, full GDS/TDS qualification
• Stress test applies (greater of 5.25% or contract+2.00%)
• Monthly payment commitment

Best fit: A senior still working part-time or with strong pension income who wants the cheapest cost of capital and is comfortable with a monthly payment.

Option 4 — Downsizing

How it works. Sell the family home, buy something smaller (or rent), and pocket the difference.

Real example. Toronto detached home sold for $1.4M, replaced with a $700K 2-bedroom condo:

• Sale proceeds (after 4% commission + legal): ~$1.34M
• New condo purchase + LTT + closing: ~$735K
• Net cash freed: ~$605K

Pros:

• Largest equity unlock — no interest, no debt
• Lower ongoing costs (smaller property tax, less maintenance)
• Liberates capital for investment, travel, gifting

Cons:

• Selling costs (real estate commission, LTT on new home, moving)
• Emotional cost of leaving the family home
• Condo fees can offset some maintenance savings

Best fit: A senior who is willing to move and wants the largest, cheapest equity unlock with no future obligations.

How to Decide

Need monthly cash flow, no payment? → Reverse mortgage.
Need flexible, occasional access at the lowest rate? → HELOC.
Need a large lump sum and have income? → Conventional refinance.
Want to maximize equity and reduce cost of living? → Downsize.

Hybrid strategies are common. A frequent 2026 plan is to downsize to free $400K, then add a small HELOC for flexibility — keeping rate exposure low while preserving cash optionality.