Reverse mortgages often carry interest rates of around 7 per cent for a five-year fixed term, whereas a conventional mortgage is roughly 4 per cent.carebott/iStockPhoto / Getty Images
In a country where homeownership is often seen as a financial rite of passage, some Canadian parents are turning to reverse mortgages to unlock the value of their homes and gift the proceeds to family, often to be used for a down payment.
According to HomeEquity Bank, one of Canada’s major reverse mortgage lenders, the number of customers using home equity to gift money to relatives has risen 32 per cent so far in 2025 compared with a year ago. While much of that money is going toward helping children enter the housing market, some parents are using it to help pay for weddings or postsecondary tuition, according to HomeEquity.
Yvonne Ziomecki-Fisher, chief customer, brand and advice officer at HomeEquity, said more parents want to help their children now, rather than years later through an inheritance when their kids are already established.
“They want to leave a legacy, but they also want to enjoy seeing the family have it,” she said. “Whether they’re paying for weddings, down payments or school, it’s something that you can actually watch live versus it coming to everyone through inheritance.”
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While reverse mortgages can be an attractive way to share wealth during a parent’s lifetime, some advisers warn that this strategy comes with steep borrowing costs and risks leaving retirees short of funds for their own futures.
“A lot of kids, in order to buy a home, need help from mom and dad, and I think there’s a lot of parents that want to help their kids out at all costs,” said Jason Heath, managing director of Objective Financial Partners. But, because of the risks for parents’ retirement savings, he would consider it a “last resort.”
Reverse mortgages typically carry interest rates of around 7 per cent for a five-year fixed term, compared with roughly 4 per cent for a conventional mortgage. Because the principal loan and interest aren’t required to be repaid until the home is sold, vacated or the owners pass away, interest can compound over time, steadily eroding the home’s equity. In other words, it can limit what’s left for long-term care needs or an inheritance, financial planners say.
Equitable Bank has also noticed anecdotally an “uptick in the number of parents using reverse mortgage funds to gift their children an early ‘living inheritance,’ often to support their first home purchase,” said Zamina Walji, vice-president of Equitable Bank’s decumulation business, over e-mail. The bank does not have specific data on how large the uptick has been.
For many baby boomers, who saw the value of their homes grow dramatically over decades, property remains a cornerstone of security, and passing on the dream of homeownership can be as important as passing on wealth.
“Parents want to see their kids be able to have a home,” said Cindy Marques, a certified financial planner based in Toronto.
Reverse mortgages allow homeowners usually aged 55 and over to borrow up to roughly 55 per cent of the current value of their home, depending on the lender, tax-free, without affecting Old Age Security or Guaranteed Income Supplement benefits.
When they receive reverse mortgage funds, the existing mortgage must be paid off first, after which the reverse mortgage lender is registered as first priority. Leftover funds are then available to the home owner to spend as they wish. When the property is sold, the reverse mortgage lender gets repaid first. (Homeowners can make payments before the maturity date of the reverse mortgage but are not required to.)
The reverse mortgage market is still small – about $9-billion of an overall residential mortgage lending market worth about $2-trillion as of November 2024, according to the Office of the Superintendent of Financial Institutions – but it’s expanding quickly.
HomeEquity Bank’s reverse mortgage lending grew almost 20 per cent between 2023 and 2024, while Equitable Bank’s decumulation lending, which includes reverse mortgages, jumped 47 per cent over the same period.
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This strategy can come with big drawbacks. As the debt mounts, home equity shrinks, reducing what retirees can leave to their heirs or use for future expenses, such as long-term care, Mr. Heath said.
“Oftentimes I end up warning clients about being overly generous with their children,” Mr. Heath said. “People sometimes underestimate how long they live or long-term care costs.”
Sara McCullough, a certified financial planner and owner of WD Development, said using a reverse mortgage to help children can be a “dangerous game.”
For retirees, “it’s putting them at risk,” because it’s eating into what’s likely their greatest financial asset.
For children, she said, it doesn’t always help in the way parents intend. It can push them toward homes they couldn’t otherwise afford, leaving them stretched thin and struggling to keep up with costs.
“We can do damage when we think we’re helping,” Ms. McCullough said. She recommends parents let children build up good saving habits and qualify for a down payment themselves, then offer financial support later.
“As parents, maybe one of the best things we can do is teach our kids how to make financial decisions,” she said.
Some advisers recommend considering alternatives, such as drawing from savings or investments, or using a home equity line of credit (HELOC), which offers lower rates but requires monthly interest payments.
