What is the CHIP Reverse Mortgage and who qualifies for it?

The Canadian Home Income Plan (CHIP) Reverse Mortgage, offered by HomeEquity Bank, is Canada's dominant reverse mortgage product. It allows Canadian homeowners aged 55 and older to borrow up to 55% of their home's appraised value without making any monthly payments. The loan balance — original principal plus accumulated compound interest — is repaid in full when the last registered homeowner sells the property, permanently moves out, or passes away. To qualify: (1) all registered owners on title must be 55+, (2) the property must be the primary residence and owner-occupied, (3) it must be a single-family home, semi-detached, townhouse, or eligible condominium in a qualifying Canadian market, and (4) there must be sufficient equity for the CHIP to be viable after any existing mortgage is discharged. HomeEquity Bank is not the only reverse mortgage lender in Canada — Equitable Bank also offers a reverse mortgage product called the EQ Bank Reverse Mortgage — but CHIP is the market leader and has the longest operating history in Canada.

How much can I actually access — is it always 55% of my home value?

No. The 55% figure is the maximum, and most borrowers qualify for significantly less. The actual amount depends on three factors: (1) the appraised value of your home, (2) the age of the youngest registered owner on title — older owners qualify for higher percentages; a 75-year-old typically qualifies for a higher percentage than a 57-year-old, and (3) the property's location and type. In premium urban markets like Toronto and Vancouver, the percentage available can reach 45–55% for older borrowers. In smaller or rural markets, it may be 25–35%. HomeEquity Bank uses an actuarial model that ensures the loan balance will not exceed the home's value over the expected loan duration, given typical compound interest accrual and typical home appreciation rates. The only reliable way to know your specific maximum is to contact HomeEquity Bank or a broker and get a formal quote — do not plan your foreign purchase budget around an assumed 55%.

Why are reverse mortgage rates so much higher than a HELOC?

Reverse mortgage rates are higher because the lender takes on a different risk profile than a HELOC lender. A HELOC borrower makes monthly interest payments, which continuously confirms their ability to service the debt. A reverse mortgage borrower makes no payments — the lender accrues all interest and takes no payment until the loan is repaid, which may be 15–25 years away. HomeEquity Bank cannot demand repayment unless a default condition is triggered (non-payment of property taxes, property falling into disrepair, insurance lapsing, etc.). To compensate for this deferred, uncertain repayment timeline and the operational cost of maintaining a loan with no payment stream, HomeEquity Bank charges a premium over standard mortgage rates. In early 2026, CHIP rates run approximately 8–9% per annum versus a HELOC at approximately 6–7%. The rate differential may narrow in a low-rate environment and widen in a high-rate environment. Over a 10-year hold at 2% higher rate, the compound interest cost difference on $200,000 is approximately $70,000–$80,000 more accrued interest — a meaningful figure to include in your planning.

Does a reverse mortgage affect my OAS, GIS, or other government benefits?

No. Reverse mortgage proceeds are a loan advance — they are not income and are not taxable. CRA does not ask you to report reverse mortgage advances on your T1. Because they do not appear as income, they do not affect any income-tested government benefit: Old Age Security (OAS) and the OAS clawback (which applies to net income over approximately $90,997 in 2026), the Guaranteed Income Supplement (GIS), provincial senior benefits, or the Guaranteed Annual Income System (GAINS) in Ontario. This is one of the most significant advantages of a reverse mortgage over, for example, RRSP/RRIF withdrawals — drawing $200,000 from a RRIF to fund a foreign property purchase would add $200,000 to your taxable income for the year, triggering the OAS clawback and potentially eliminating GIS eligibility. The same $200,000 drawn from a reverse mortgage adds zero to your taxable income and has zero effect on income-tested benefits. If protecting government benefit eligibility is a priority — as it frequently is for retirees in the $60,000–$90,000 income range — a reverse mortgage is structurally superior to a registered account withdrawal.

What happens to my Canadian home if I spend extended time at my foreign property?

This is one of the most important practical questions for retirees combining a reverse mortgage with a foreign property purchase. The CHIP mortgage terms require: (1) the property remains your principal residence, (2) you maintain the property in good condition, (3) you keep homeowner's insurance in force, and (4) you pay property taxes on time. If you spend 5–6 months per year at your foreign property, your Canadian home sits vacant for extended periods. Standard homeowner's insurance policies typically exclude claims arising from a property that has been vacant for 30–60 consecutive days — if your home is broken into or has a water damage event while you are in Mexico, you may not be covered. The solution: inform your insurer, obtain a vacant property endorsement or rider (available at modest cost), and arrange for regular check-ins by a property manager or trusted neighbor. Do not discover this coverage gap after a claim. Additionally, HomeEquity Bank's definition of 'primary residence' is occupation for the majority of the year — if you permanently relocate to your foreign property, the CHIP becomes due and payable.

Can I make voluntary payments to reduce the compounding reverse mortgage balance?

Yes. Most reverse mortgage products, including CHIP, allow voluntary partial prepayments — but they typically come with prepayment penalties unless the payment falls within a permitted prepayment window. HomeEquity Bank allows a partial prepayment of up to 10% of the original loan amount per year without penalty (verify the current terms with HomeEquity Bank directly, as prepayment privileges vary by mortgage agreement). Making annual voluntary payments of even $5,000–$10,000 from rental income generated by the foreign property can meaningfully slow the compound interest trajectory over a 10–15 year hold. If your foreign rental property generates net rental income after HELOC-equivalent costs and expenses, consider directing a portion of that income to annual reverse mortgage prepayments to preserve more estate equity. Model this in advance — a $10,000 annual prepayment on a $200,000 reverse mortgage at 8.5% reduces the outstanding balance by approximately $100,000 over 10 years compared to making no payments.

Is the No Negative Equity Guarantee actually meaningful protection?

Yes, in a downside scenario — but it is important to understand exactly what it protects. HomeEquity Bank's No Negative Equity Guarantee means that when the home is sold and the reverse mortgage is repaid, if the outstanding loan balance exceeds the home's fair market value, HomeEquity Bank absorbs the shortfall. You (or your estate) will never be required to pay more than the home sells for. In a scenario where Canadian housing values decline significantly — for example, a 25–30% price correction in a major market — a reverse mortgage drawn at 50% of peak value could theoretically exceed the sale value after 10–15 years of compound interest. The guarantee prevents this from becoming your estate's liability. What the guarantee does NOT protect: the erosion of equity through compound interest in a stable or modestly appreciating market. If your home appreciates 3–4% per year but your reverse mortgage is compounding at 8–9%, the lender's share of your home's value is growing every year — you just will not owe more than the home is worth at the time of sale. The guarantee is protection against a catastrophic negative equity scenario, not against equity erosion in the normal course.

Should I use a reverse mortgage or a HELOC to fund a foreign property purchase?

The answer depends entirely on your cash flow situation in retirement. A HELOC at 6–7% with monthly interest-only payments is the better choice if you have the cash flow to sustain those payments — you pay less interest over time, preserve more equity, and retain more flexibility (HELOCs can be drawn and repaid repeatedly; a reverse mortgage accrues with each repayment triggering potential penalties). A reverse mortgage at 8–9% with no monthly payments is the right choice if you cannot sustain monthly HELOC interest payments on your retirement income. Consider a retiree with $70,000 per year in combined pension and RRIF income who owns a $1.2M Toronto home and wants to buy a $350,000 USD condo in Puerto Vallarta. A HELOC draw of $490,000 CAD (at 1.40 rate) at 6.5% requires $2,658 per month in interest-only payments — $31,900 per year. For someone with $70,000 in annual income paying property tax, insurance, and living expenses, this may not be sustainable. A reverse mortgage draw of $490,000 at 8.5% with zero monthly payment preserves all $70,000 of annual income while the interest accrues against home equity. The compound interest cost is real and must be modeled — but for the right candidate, the absence of monthly obligation makes the foreign purchase viable when a HELOC would not be.

Reviewed on March 2026 by the Compass Abroad editorial team

Using a Reverse Mortgage to Buy Property Abroad — Canadian Guide

Canadian homeowners 55+ can access up to 55% of their home's appraised value through the CHIP Reverse Mortgage with no monthly payments required. The proceeds are tax-free and do not affect OAS or GIS. Using those proceeds to buy property abroad is entirely legal — the main tradeoff versus a HELOC is a higher rate (8–9% vs 6–7%) and compound interest that erodes home equity over time with no monthly payments to offset it.

This guide covers the full reverse mortgage mechanics for foreign property buyers: how much you can actually access, how the compound interest trajectory affects estate planning, what CHIP's terms require of you while spending time at your foreign property, and a side-by-side comparison of reverse mortgage versus HELOC versus selling your Canadian home. Includes the CRA reporting obligations that apply regardless of how you fund the purchase.

Key Takeaways

HomeEquity Bank's CHIP Reverse Mortgage is Canada's dominant reverse mortgage product. Homeowners 55+ can access up to 55% of their home's appraised value with no monthly payments required.
Reverse mortgage proceeds are a loan — not income. They are received tax-free and do not affect OAS, GIS, or other income-tested government benefits.
Rates are significantly higher than a HELOC: typically prime plus 2–3%, running approximately 8–9% per annum in early 2026 — compared to HELOC rates of approximately 6–7%.
The defining advantage over a HELOC: no monthly cash flow impact. Interest accrues and compounds; the full balance (principal plus accumulated interest) is repaid from estate proceeds when the home is sold, the owner moves out, or the owner passes away.
The ideal candidate is an asset-rich, cash-poor retiree who wants to keep their Canadian home AND buy a foreign property without triggering monthly carrying costs they cannot sustain on a fixed retirement income.
Compound interest erodes home equity over time. On a $200,000 reverse mortgage at 8.5%, the outstanding balance grows to approximately $300,000 in 5 years and $450,000 in 10 years — significantly reducing the equity available to the estate.
HomeEquity Bank's 'No Negative Equity Guarantee' means you can never owe more than the home's fair market value at the time of repayment — protecting the estate from an underwater position if Canadian home values decline.
Foreign property purchased with reverse mortgage proceeds creates the same CRA reporting obligations as any other foreign property: T1135 if cost exceeds $100,000 CAD, and T776 if it generates rental income.

55%

Maximum of home value accessible via CHIP Reverse Mortgage

55+

Minimum age for all registered homeowners on title

Monthly payments required — interest accrues and compounds

8–9%

Approximate CHIP interest rate in early 2026

Key Facts: Reverse Mortgage for Foreign Property

Maximum reverse mortgage amount: Up to 55% of appraised home value — amount varies by age, property location, and appraised value(HomeEquity Bank CHIP program)
Minimum age requirement: 55+ for all registered owners on title(HomeEquity Bank CHIP eligibility)
Reverse mortgage rate (2026): Approximately prime + 2–3% (roughly 8–9% per annum as of early 2026)(HomeEquity Bank posted rates)
HELOC rate for comparison (2026): Prime + 0.5–1% (approximately 6.0–6.7% per annum)(Canadian Big 5 banks)
Tax treatment of proceeds: Tax-free — it is a loan advance, not income(CRA — loan proceeds are not income)
Impact on OAS/GIS: None — loan proceeds do not count as income for income-tested benefits(Service Canada)
No Negative Equity Guarantee: HomeEquity Bank guarantees you will never owe more than your home's fair market value(HomeEquity Bank CHIP mortgage agreement)
Repayment trigger: Home sale, all registered owners move out, or death of last registered owner(CHIP mortgage agreement standard terms)
Setup fees: Appraisal fee, legal fees, title insurance — typically $2,000–$3,500 total(HomeEquity Bank fee schedule)

How the CHIP Reverse Mortgage Works — The Core Mechanics

HomeEquity Bank's CHIP Reverse Mortgage is structured as a loan secured against your Canadian principal residence — identical in its legal structure to any other mortgage. The defining difference is the absence of mandatory monthly payments. Instead of requiring you to service the debt as you go, HomeEquity Bank allows interest to accrue on the outstanding balance. The full amount — original principal plus all accumulated compound interest — is due in one lump sum when you sell the home, when all registered owners permanently move out, or when the last registered owner passes away.

The loan amount is determined by a combination of your age, your home's appraised value, and your property's location. The older you are at the time of application, the higher the percentage of your home value you can access — this is because the expected duration of the loan is shorter, reducing the lender's compound interest exposure. A 75-year-old borrower in Toronto with a $1,400,000 home may qualify for up to $650,000–$700,000 (45–50% of value). A 57-year-old borrower in the same home may qualify for only $280,000–$350,000 (20–25%). The 55% ceiling applies to the most favorable combination of age and location.

If you have an existing mortgage on the property, HomeEquity Bank will require it to be discharged at closing, using the reverse mortgage proceeds. Your net available funds are the gross reverse mortgage amount minus the existing mortgage balance and closing costs. This can significantly reduce the net proceeds available for a foreign property purchase if you still carry a meaningful mortgage balance.

The proceeds are delivered as tax-free cash — a loan advance that does not appear on your T1 as income. You can take the full amount at once or in structured advances over time, depending on the product terms you negotiate with HomeEquity Bank. For a foreign property purchase requiring a lump-sum payment at closing, the single advance structure is most practical.

Who This Strategy Makes Sense For — The Asset-Rich, Cash-Poor Retiree

The reverse mortgage is not the right tool for every Canadian retirement property buyer. It is a highly specific solution to a specific problem: the retiree who has accumulated significant equity in a Canadian home over 30–40 years but has relatively modest liquid assets and fixed retirement income — a profile extremely common among Canadian homeowners in major cities who purchased in the 1980s or 1990s and have seen their home values multiply 5–10x while their liquid savings remain modest.

Consider a retired couple in their mid-60s in Calgary. Their home, purchased in 1992 for $180,000, is now worth $850,000. They carry no mortgage. Their combined income is $74,000 per year — a combination of CPP, OAS, and RRIF withdrawals. They want to buy a $280,000 USD condo in Puerto Vallarta to spend winters there. Their options: (1) A HELOC at 6.5% on $680,000 of equity (80% LTV), monthly interest-only payment on a $392,000 CAD draw would be approximately $2,124 per month — $25,488 per year, or about 34% of their after-tax income. Unsustainable. (2) Selling the Calgary home — but they want to keep it as their principal residence and Canadian base. (3) A reverse mortgage draw of $320,000–$380,000 (approximately 38–45% of appraised value at their ages), with zero monthly payments. The compound interest accrues against home equity they plan to leave to their children, but they maintain their lifestyle, their Canadian home, and their ability to spend winters in Mexico. This is the profile for which the reverse mortgage exists.

The strategy does not make sense for retirees with substantial liquid assets (use those first or use a HELOC), for retirees with high cash flow relative to home equity (HELOC is cheaper), or for retirees whose estate planning priority is maximizing the inheritance passed to children (each year of compound interest reduces the equity available to the estate).

Reverse Mortgage vs HELOC vs Selling — Full Comparison

For a Canadian retiree evaluating funding options for a foreign property, these three approaches cover the realistic range. Each serves a different profile — understanding the trade-offs is more useful than a simple recommendation.

Reverse mortgage vs HELOC vs selling for funding foreign property
Feature	Reverse Mortgage (CHIP)	HELOC	Selling Canadian Home
Monthly payment required	No — interest accrues and compounds	Yes — interest-only payments on drawn balance (approx. 6–7% per annum)	No payment — you have the proceeds
Amount accessible	Up to 55% of home value (age and location dependent)	Up to 80% of home value minus outstanding mortgage	100% of net equity after mortgage discharge and selling costs
Rate (early 2026)	~8–9% per annum (prime + 2–3%)	~6.0–6.7% per annum (prime + 0.5–1%)	No ongoing rate — capital is liquid
Keeps Canadian home	Yes	Yes	No — home is sold
Tax on proceeds	Tax-free (it is a loan)	Tax-free (it is a loan)	Possible capital gains if not principal residence
Impact on OAS/GIS	None — loan proceeds not income	None — loan proceeds not income	Possible: large capital gain reported as income in year of sale could affect income-tested benefits
Compound interest risk	High — balance doubles in ~8–9 years at 8%	Moderate — but monthly payments prevent compounding if paid	None — debt is discharged at sale
Estate impact	Balance repaid from estate — reduces inheritance	Balance repaid when drawn HELOC balance is settled	No debt impact — equity flows to estate
Best for	Asset-rich, cash-poor retirees who cannot sustain monthly HELOC payments	Homeowners with sufficient retirement cash flow to service interest payments	Buyers comfortable leaving Canadian real estate market; downsizing or relocating

The Compound Interest Risk — Modeling What You Owe Over Time

The absence of monthly payments is the reverse mortgage's defining advantage — and its most significant financial risk. When you make no payments, the interest does not disappear: it accrues and compounds monthly against the outstanding balance. At 8.5% per annum compounded monthly, the rule of 72 predicts the balance doubles approximately every 8.5 years. Over a 15-year retirement horizon, a $200,000 draw more than triples.

The compound interest schedule on a $200,000 reverse mortgage at 8.5% per annum: Year 1 balance $217,000; Year 3 balance $255,000; Year 5 balance $299,000; Year 10 balance $448,000; Year 15 balance $671,000; Year 20 balance $1,005,000. If the same Calgary home (appraised at $850,000 today) appreciates at 3% per year, it is worth $1,144,000 in 10 years — meaning the $448,000 reverse mortgage balance represents 39% of home value, up from 24% at origination. At 15 years, the $671,000 balance represents 51% of the $1,325,000 projected home value. At 20 years, the $1,005,000 balance represents 65% of the $1,534,000 projected value. If home appreciation is slower than 3%, the erosion is faster.

This analysis is not a reason to avoid the strategy — it is essential context for an informed decision. For the retiree who needs the cash to enjoy retirement and intends to leave their children a meaningful inheritance, the right question is not "will I leave less to my children with a reverse mortgage?" (almost certainly yes) but "what am I giving up in retirement experience and quality of life by not using this equity?" For many retirees, the answer is the winters in Mexico they wanted and could not otherwise afford.

One practical mitigation: if the foreign rental property generates net income, use a portion of that income to make voluntary annual prepayments on the reverse mortgage. HomeEquity Bank permits prepayments up to 10% of the original loan balance per year without penalty (confirm current terms). A $20,000 annual prepayment on a $200,000 loan reduces the compounding trajectory significantly — approximately halving the balance growth over a 10-year period compared to no prepayments at the same interest rate.

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CHIP Mortgage Terms: What They Require When You Own Property Abroad

Owning a reverse mortgage and a foreign property simultaneously creates a set of practical obligations that must be managed carefully. The CHIP mortgage agreement contains several conditions whose implications change when you begin spending significant time at a foreign property.

Principal residence requirement. HomeEquity Bank requires the mortgaged property to remain your principal residence. In Canadian income tax and mortgage law, "principal residence" is generally defined as the dwelling you ordinarily inhabit. Spending 5–6 months per year in Mexico or Portugal does not necessarily disqualify the Canadian property as your principal residence — millions of Canadians spend significant time abroad while maintaining their Canadian home as their primary address, filing Canadian taxes, and maintaining Canadian ties. However, a permanent relocation to the foreign property — changing your CRA address, surrendering provincial health coverage, filing as a non-resident — would likely trigger the CHIP repayment. If you are considering emigrating from Canada, the reverse mortgage must be repaid at that point. Plan accordingly.

Property maintenance and insurance. A vacancy of 60+ days in many Canadian markets triggers a homeowner's insurance vacancy clause, which can void coverage for specific claims. Before spending an extended winter at your foreign property, contact your insurer, disclose the vacancy, and purchase a vacant property endorsement or rider. This typically costs $100–$300 per season and eliminates the coverage gap. If the property suffers an insured loss while improperly insured due to vacancy, the insurance claim may be denied — creating a loss that HomeEquity Bank could argue constitutes a failure to maintain the property, triggering a default under CHIP terms.

Property tax payments. CHIP terms require property taxes to be paid on time. If you are abroad for extended periods, set up preauthorized property tax payments through your municipality's auto-payment program, or direct an accountant or property manager to monitor and pay the tax notices. A property tax arrears notice arriving while you are in Puerto Vallarta for four months is easily missed and can create a default condition. Most Canadian municipalities allow monthly pre-authorized property tax debits — use this and verify the payments are processing before you leave.

CRA Obligations on the Foreign Property — T1135 and Rental Income Reporting

How you funded the foreign property purchase does not affect your CRA obligations on the property itself. Whether you used a reverse mortgage, a HELOC, cash savings, or any other source, the same reporting obligations apply.

If the cost of the foreign property exceeds $100,000 CAD, you must file T1135 (Foreign Income Verification Statement) annually. The "cost" for T1135 purposes is the actual acquisition cost in Canadian dollars — the purchase price converted at the rate on the date of purchase. A $350,000 USD condo purchased when CAD/USD was 1.40 has a Canadian cost of $490,000, which is well above the threshold. T1135 is due with your annual T1 return and requires: country, description of property, maximum fair market value during the year, year-end fair market value, income earned, and any gain or loss on disposition. See our Canadian tax guide for foreign property for complete T1135 filing instructions.

If you rent the foreign property, rental income must be reported on T776 (Statement of Real Estate Rentals) attached to your T1 return. You may deduct allowable expenses against that rental income. One important note for reverse mortgage borrowers: unlike a HELOC, the interest on your reverse mortgage is not paid in cash — it accrues. CRA's position is that interest expense is deductible when it is paid or when it accrues, depending on the accounting method. Accrued but unpaid interest (the reverse mortgage interest that compounds without monthly payments) may be deductible in the year it accrues if the borrowed funds were used for an income-producing purpose. This is a nuanced tax question — consult a Canadian accountant before claiming reverse mortgage interest as a rental deduction on T776, as the deductibility of accrued-but-unpaid interest is not universally straightforward.

Step-by-Step: How to Use a Reverse Mortgage to Fund a Foreign Property Purchase

Confirm Eligibility: Age, Title, and Property Type

Every registered owner on title must be 55 or older. This is the most common eligibility trap: if a 62-year-old homeowner has a 48-year-old spouse on title, neither qualifies for CHIP until the younger owner turns 55 — or the younger owner is removed from title, which requires independent legal advice and potentially triggers land transfer tax implications. Properties eligible include owner-occupied single-family homes, semi-detached homes, townhouses, and condominiums in most major Canadian cities. Rural properties, acreages, and co-operative housing are not eligible. Contact HomeEquity Bank directly or through a mortgage broker to get an eligibility confirmation before incurring any appraisal costs.

Get a HomeEquity Bank Appraisal and Maximum Amount Estimate

HomeEquity Bank sends an approved appraiser to assess your home. The appraisal fee is typically $300–$600 and is paid upfront. HomeEquity Bank will provide a maximum amount based on: (1) the appraised value, (2) your age and the age of the youngest registered owner — older owners qualify for higher percentages, and (3) the property location. In major cities (Toronto, Vancouver, Calgary, Ottawa), most 65+ homeowners qualify for 40–55% of home value. In smaller markets, the maximum percentage is lower due to HomeEquity Bank's risk model. Do not assume 55% — get the actual maximum quoted before planning your foreign purchase budget.

Obtain Independent Legal Advice Before Signing

HomeEquity Bank requires you to consult an independent lawyer — not a lawyer referred by the bank — before finalizing the reverse mortgage. This is mandatory, not optional. The lawyer must certify that you understand the product, the compound interest risk, and the repayment triggers. Use this requirement productively: ask your lawyer to review the mortgage agreement and explain the exact conditions under which HomeEquity Bank can demand early repayment (most commonly: failure to maintain the property, allowing the property to become uninsured, renting the property without consent, or failing to pay property taxes). These conditions matter if you plan to spend extended periods at your foreign property.

Receive Proceeds Tax-Free and Convert Currency Before Buying

Reverse mortgage proceeds arrive as Canadian dollars deposited to your bank account. They are not income — no T4, no T5, no CRA reporting by the bank. Do not convert to foreign currency through your Canadian bank's foreign exchange desk. Use an FX specialist (MTFX, Wise, or OFX) to convert CAD to USD or EUR at a spread of 0.5–1% versus the bank's 2–4%. On a $200,000 draw converted to USD for a Mexican purchase, this saves $3,000–$7,000 CAD. If your foreign property closing is 30–90 days away, consider a forward contract to lock in today's CAD/USD rate and eliminate currency risk during due diligence.

Maintain the Canadian Home to Protect the Reverse Mortgage

CHIP mortgage terms require you to maintain the property in good condition, keep it insured, pay property taxes on time, and — critically — not rent it out without HomeEquity Bank's prior consent. If you plan to spend 4–6 months per year at your foreign property, your Canadian home may sit vacant for extended periods. Review your homeowner's insurance policy: most policies exclude claims arising from a home that has been vacant for 30–60 consecutive days without a vacant property endorsement or rider. A lapsed insurance policy triggers a default under the CHIP terms. Before leaving Canada for an extended stay at your foreign property, arrange a house-sitter, a regular check-in service, or a vacant property rider with your insurer.

Model the Compound Interest Trajectory Against Your Estate Plan

Before drawing the reverse mortgage, run the compound interest model to your expected time horizon. At 8.5% compounded annually: a $200,000 draw becomes $299,000 in 5 years, $446,000 in 10 years, and $664,000 in 15 years. Compare this to your home's projected appreciation over the same period. If your home appreciates at 4% per year, a $900,000 home becomes $1,080,000 in 5 years, $1,332,000 in 10 years — meaning the reverse mortgage balance as a share of home value grows from 22% to 28% to 33% over 10 years. If home appreciation is lower than the rate differential, equity erosion is faster. Discuss this explicitly with your estate lawyer and any adult children who may inherit the property.

Frequently Asked Questions: Reverse Mortgage to Buy Property Abroad

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