A HELOC has a lower rate. A reverse mortgage has a structure that cannot be taken away from you. For a retiree on a fixed income, those are not equal trade-offs. This page compares both products honestly — including the things most comparison pages leave out.
The rate gap between a reverse mortgage and a HELOC is real. Here's what it means in practice on a $200,000 balance.
HELOC at prime + 0.5% (assume 7.7% total): Monthly interest-only payment: approximately $1,283. Over 12 months: $15,400 paid in interest. Balance at the end of Year 1: still $200,000. The balance doesn't grow — but the payment obligation doesn't go away either.
Reverse mortgage at 6.5% semi-annual — no payments: Balance at end of Year 1: approximately $213,325. Over 10 years at the same rate: approximately $375,000. The cost is real — it's deferred rather than current.
The honest comparison question is not which product charges less interest. It's which product's cost structure is manageable given your actual income and cash flow.
For a retiree with $28,000 per year in CPP and OAS: the monthly HELOC interest payment on $200,000 represents approximately 55% of monthly income — going to one payment, before anything else. The reverse mortgage payment is $0. Income unchanged. Balance grows invisibly.
The HELOC looks cheaper in rate. In cash flow terms, for someone on a fixed income, it can be a substantially heavier burden. And that's before accounting for the fact that many retirees cannot qualify for a $200,000 HELOC at all.
A HELOC is a demand facility. The contractual terms permit the lender to close it, freeze it, or reduce the limit at any time, for any reason, without advance notice. This is not theoretical — it happened to thousands of Canadians during market corrections and tightening credit cycles. If you are relying on a HELOC to supplement retirement income, a lender policy change can eliminate that income overnight. You had no part in that decision.
A reverse mortgage is non-callable. As long as you maintain the property, pay property taxes on time, and keep home insurance current, the lender cannot demand early repayment, reduce your approved limit, or close the facility. That structural certainty has real value when you're depending on the funds.
Here's how it plays out for many retirees who use a HELOC to supplement income:
Each step seems manageable in isolation. The cumulative effect is a steadily worsening position that cannot be reversed once it starts.
A reverse mortgage has no mandatory payment, no variable rate shock within the term, and cannot be frozen. The structure prevents this spiral from occurring.
Book a free consultation and I'll run a full comparison — both products, all four reverse mortgage lenders, equity projection. You'll have the full picture in writing before making any decision.