Reverse Mortgage or Downsizing? Five Ways to Get Money From Your BC Home

If you are 55 or older and own your home, you have five choices for the value in it: sell and buy a smaller home, take a reverse mortgage, open a home equity line of credit, defer your property tax, or stay and borrow nothing. This guide compares the five, using what the Government of Canada and the Province of BC publish. Three of them are loans that keep you in your house, and we cover those with the same care as selling.

Which words do you need before you compare?

Equity is the part of your home's value that you own after the debts on it are subtracted. The Financial Consumer Agency of Canada (FCAC), a federal government agency, gives this example: a home worth $250,000 with a mortgage balance of $150,000 has $100,000 in equity.

A reverse mortgage is a loan against your home that needs no regular payments. The debt is repaid at the end, for example when you sell or move out.

A home equity line of credit (HELOC) is a loan you can borrow from, repay and borrow from again, up to a limit. Your home is the lender's security: if you do not repay, the lender may take the home.

A lien is a legal claim registered against your property that stays until a debt is paid.

Compound interest is interest charged on earlier interest. When you make no payments, the interest is added to the debt, and the next interest charge is worked out on the larger amount.

How a debt grows when you make no payments

The rate below is an example chosen only to show the arithmetic. Ask each lender for its real rate.

You borrow $100,000 at an example rate of 6% a year. Interest is added once a year, and you make no payments. In year 1 the interest is $100,000 × 0.06 = $6,000, and you owe $106,000. In year 2 the interest is $106,000 × 0.06 = $6,360, and you owe $112,360. The additional $360 is interest on the first year's interest: $6,000 × 0.06 = $360.

Source: FRIVE team arithmetic at the example rate. Each figure is $100,000 multiplied by 1.06 once for each year, rounded to the nearest dollar.

After 20 years the debt is $220,714 larger than the amount borrowed. The same arithmetic applies to every loan with no payments, including a reverse mortgage and deferred property tax.

What does a reverse mortgage give you, and what does it cost?

The facts in this section come from FCAC's page on reverse mortgages.

Who can get one, and how much

FCAC calls a reverse mortgage "a type of loan for homeowners, usually aged 55 or older". The home must usually be your primary residence, which FCAC says typically means you live in it for at least 6 months a year.

You may usually borrow up to 55% of the current value of your home. On a home valued at $1,000,000, 55% is $550,000. The lender sets the real amount. FCAC says it depends on your age and the age of the other people registered on the title (the legal record of who owns the property), on your home's condition, type and appraised value, and on your lender. An appraised value is a professional's estimate of what the home is worth.

How you receive the money

FCAC lists three ways: one payment for the entire amount, one payment for part with the rest over time, or regular payments. With the first, you pay interest on the full amount from the start. With the second, a lender may charge a fee each time you take more, and may change the interest rate on the entire loan.

On tax and benefits, FCAC's words are: "you don't pay tax on the money you borrow", and "this money doesn't affect the Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting".

What it costs

FCAC says: "You don't need to make any regular payments on a reverse mortgage." The lender adds the interest to the loan, so "the total amount you owe increases over time".

FCAC says the interest rate is usually higher than the rate for a mortgage or a HELOC. It publishes no rate, and we give none. The other costs it lists are home appraisal fees, set-up fees, legal fees, closing costs (the costs of completing the loan), and a penalty if you pay off the loan before it is due.

When you repay it, and what your estate receives

FCAC says you need to repay the balance when:

• you sell your home
• you move out of your home
• the last borrower dies
• you default on the reverse mortgage

To default means to break the contract, for example by letting the home fall into poor repair so that its value drops. FCAC says default may lead to foreclosure, the legal process a lender uses to take a home.

Your estate is everything you own when you die. FCAC names three effects on it:

• your estate may need to repay the loan and the interest within a set period of time
• settling an estate may take longer than the time allowed to repay
• there may be less money to leave to your children or other people who inherit from you

How is a home equity line of credit different?

A HELOC has regular payments, and the lender checks that you can make them. FCAC's page on home equity lines of credit gives these facts:

• Amount. "With a HELOC, you may borrow up to 65% of the value of your home." For a HELOC that is separate from a mortgage, you need equity of more than 35%.
• Payments. You pay interest only on the amount you have borrowed. Your lender may require regular payments of the interest alone, or of the interest and part of the amount borrowed. FCAC warns that "if you only pay the interest, you won't pay off your loan".
• Interest rate. Most HELOCs have a variable rate, which is a rate that can go up or down. FCAC says "your lender may change your interest rate at any time". A federally regulated lender, such as a bank, must give you written notice within 30 days of the change. A higher rate may raise your minimum payment.

Why qualifying can be the hard step for a retired owner

FCAC says you must pass a "stress test" to qualify for a HELOC at a bank: "you need to prove you can afford payments at a qualifying interest rate." Its page on lines of credit says a lender considers your income, your current level of debt and your credit report and score, which record how you have repaid past debts. It adds that financial institutions "usually require a minimum household income".

So a lender measures your income as well as your home, and an owner with a house of high value and a small pension may be refused. Ask the lender which income it counts before you pay for an appraisal.

What does BC's property tax deferment cover?

It covers one bill: your property tax. The Province of BC pays your current year's property tax for you and registers a lien on the property. The regular program is open to an owner who is 55 or older during the current year. You must keep equity of at least 25% of your home's value as set by BC Assessment, the provincial agency that values property for tax.

The cost changed in 2026. For tax deferred for 2026 and later years, the Province charges compound interest, added monthly, at 2% above the prime rate of the government's main bank. A prime rate is a bank's base rate for loans. From October 1 to December 31, 2026, that rate is 6.45%. In the Province's own example, $3,000 of deferred tax grows to $3,638.58 after three years at 6.45%. The regular program also charges $60 on a first application and $10 for each yearly renewal.

You repay the loan in full when you sell. The tax money you would have paid stays in your account for other costs. Our post on property tax deferment and the seniors grant explains the rules for tax deferred before 2026 and how to apply.

What do you get, and what do you pay, when you sell and downsize?

Selling turns the full value of the house into money. After you pay the costs below, any mortgage, and the price of the smaller home, the amount left is yours, with no debt and no interest.

The costs come once:

• Commission, plus goods and services tax (GST). BC Financial Services Authority, the provincial regulator of real estate, says there is no standard commission in BC. You negotiate the amount. The Canada Revenue Agency says an agent's services in a home sale are generally taxable, and the GST rate in BC is 5%.
• Property transfer tax on the home you buy. The Province charges 1% of the first $200,000 and 2% from $200,000 to $2,000,000. For example, the Fraser Valley Real Estate Board benchmark price of a condo, which is the board's price for a typical one, was $461,800 in September 2026. The tax on that price is 1% × $200,000 = $2,000, plus 2% × $261,800 = $5,236, for a total of $7,236.
• Legal fees and moving. Ask a lawyer or notary and a mover for written quotes.

On income tax, the Canada Revenue Agency says that if the home was your principal residence for every year you owned it, you do not pay tax on the gain. A principal residence is the home you live in. You still report the sale on your tax return. Our post on tax when you sell your home explains the rule.

Selling also has a cost that is not money. You leave a house you may have lived in for decades, and you may leave neighbours, a doctor and daily habits. Each loan in this guide lets you keep those. Give that as much weight as the numbers.

How do the five choices compare?

The fifth choice is to stay and borrow nothing. You keep the house, you owe nothing, and your estate receives the full value of the home. You pay the property tax, the insurance and the repairs from your income and savings.

Source: FRIVE team summary of the Financial Consumer Agency of Canada and Province of BC pages linked above.

If the house itself is the problem

Sometimes the reason to move is the stairs or the bathtub. Our post on staying and adapting your home, or downsizing covers the changes that can let you stay.

Using two choices together, or one after the other

Four published facts apply if you defer or borrow now and sell later:

• Each debt is repaid from the sale. FCAC says a reverse mortgage and a HELOC must be paid back when you sell, and the Province says the same for deferred tax. Subtract each balance from the sale price before you set a budget.
• A reverse mortgage may close your other loans. FCAC says you may need to pay off and close any loans or lines of credit secured by your home.
• Deferment counts your other loans. The Province adds up every charge registered against the property when it checks your 25% equity. For a line of credit it uses the full credit limit, including the part you have not borrowed. It also lists "refinancing your property" among the changes that require full repayment of deferred tax, so ask the deferment office before you add a loan.
• Borrowing shortly before a sale adds costs. You pay the set-up fees, and FCAC says that if you pay off a reverse mortgage early, "you may need to pay a fee".

What should you ask before you sign?

Questions for a reverse mortgage or HELOC lender

FCAC's reverse mortgage page tells borrowers to ask the lender:

• which fees apply, and which are added to the loan
• how you may receive the money
• whether there are restrictions or fees on how you use it
• what fee you pay if you repay the loan early
• how much time you or your estate have to repay it
• what could cause you to default

On legal advice, FCAC says: "In some provinces and territories, your lender may require that you get independent legal advice. If that's not the case in your province or territory, you may still wish to get legal advice." Independent means the lawyer works for you and has no connection to the lender. FCAC also says "you may wish to speak with a financial advisor and with your family before getting a reverse mortgage". Our advice is to do all three before you sign any loan against your home.

Questions before you sell

• What price range do recent sales of homes like yours support?
• What is each agent's commission in dollars, with GST?
• What would the smaller home cost each month, with property tax, insurance and strata fees, the monthly fees a condo or townhouse complex charges its owners?
• Will you sell first or buy first?

Which choice do we suggest?

This section is the FRIVE team's opinion. We earn money only when a home is sold or bought, and we earn nothing when an owner borrows, defers tax or stays. Weigh our view with that in mind.

Source: FRIVE team opinion.

This guide is general information about published rules. It cannot replace advice on your own loan, tax return or will. Before you sign, get independent legal advice from your own lawyer, speak with a financial planner, and confirm tax questions with your own accountant.

Next step

Every choice on this page starts from one number: what your house would sell for. Ask us for a free home value, and a BC-licensed REALTOR® will email you a price range based on recent sales of homes like yours. Then enter that price in the downsizing calculator to see the money a sale would leave. You do not have to sell with us, or sell at all. The rest of our downsizing guide covers tax, strata fees and six Fraser Valley cities.