Home equity loan or second mortgage
This is a lump sum registered against your property behind your first mortgage. You receive the funds at closing and make monthly payments, usually interest-only on a private second. It is fast, it does not disturb your existing first mortgage rate, and it works with bruised credit because approval is equity-driven. The trade-off is a required monthly payment and a short term that must be renewed or exited.
Home equity line of credit
A HELOC is revolving credit secured by the home. You draw only what you need and pay interest on the balance. Bank HELOCs carry the lowest rates of the three but require income qualification and a stress test, which excludes many retirees and self-employed homeowners.
Reverse mortgage
A reverse mortgage is available to Canadian homeowners aged 55 and over. You borrow against the home and make no required monthly payments. The interest accrues and the loan is repaid when the home is sold, when you move out permanently, or from the estate. Rates are higher than a HELOC and the balance grows over time, but cash flow is untouched, which is exactly the point for a retiree on a fixed income.
- No monthly payments required
- Available from age 55, based on age, property, and location
- You keep title and ownership of the home
- Balance grows with accrued interest
- Repaid on sale, move, or from the estate
How to choose
If you have reliable income and want the cheapest money, a HELOC or refinance wins. If you have equity, need funds quickly, and can service a payment for a year or two, a second mortgage is faster and more flexible. If monthly cash flow is the actual problem, a reverse mortgage solves what the other two make worse.
The estate question
Families often worry that a reverse mortgage means losing the home. It does not. You keep title, and the estate keeps whatever equity remains after the loan is repaid. Canadian reverse mortgages carry a no negative equity guarantee, so the estate never owes more than the fair market value of the home when it is sold.
Frequently asked questions
- Can I have a reverse mortgage and a regular mortgage at the same time?
- No. A reverse mortgage must be in first position, so any existing mortgage is paid out from the proceeds at closing.
- Does a reverse mortgage affect OAS or GIS?
- Funds from a reverse mortgage are loan proceeds, not income, so they do not affect income-tested benefits.
- Which is cheaper over five years?
- A HELOC is almost always cheapest if you qualify and can carry the payments. Compare total cost, not the headline rate.
Talk to a Toronto private mortgage specialist
We arrange equity-based financing across Toronto and the GTA, whether you need a first position from a private lender or a second mortgage behind the bank you already have.