Reverse Mortgage vs HELOC in Canada: The 2025 Guide for Retirees

Introduction

Across Canada, many retirees ask: “What’s better for me — a HELOC or a reverse mortgage?” Both let you borrow against your home, but they work very differently. The right choice depends on your income, goals, and risk tolerance.

What is a HELOC?

A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by your home.

1. You borrow up to a limit (usually up to 65% of your home’s value minus outstanding debt).

2. You must make monthly interest payments, and eventually principal as well.

3. Qualification requires proof of income, good credit, and passing a federal “stress test.”

4. Most HELOCs in Canada are variable rate, meaning your payments can increase if rates rise.

What is a Reverse Mortgage?

A reverse mortgage allows Canadians 55+ to access up to 59% of their home’s appraised value without monthly repayment obligations.

• No income or credit score needed.

• No monthly payments required.

• Repayment only happens when you sell, move, or pass away.

• Funds can be received as a lump sum, planned advances, or a combination.

Case Study: HELOC Denial vs Reverse Mortgage Approval

A retired Burlington, ON couple applied for a HELOC to fund medical expenses. Despite owning their home outright, they were denied because their pension income didn’t meet bank stress-test rules.

Instead, they were approved for a reverse mortgage and accessed $250,000 in tax-free equity. This allowed them to cover healthcare costs and supplement their income without adding a new monthly bill.

When HELOCs May Work Better

• If you’re still working.
  

• If you have strong income and credit.
  

• If you need short-term borrowing for renovations or a project.
  

Why Reverse Mortgages Fit Retirees

• Protects cash flow.

• Accessible even if income is low.

• Designed for long-term retirement security.

  👉 Want clarity on which option fits your lifestyle? Book your free call today.