Payment optional mortgage

What is a payment optional mortgage?

A payment optional mortgage lets you pull out some of the equity in your home, typically between $50,000 and $500,000, and decide how (or if) you want to make payments.

You can pay the monthly interest to keep the balance from growing. You can make no payments at all and let the interest compound. Or you can do something in between. And you can change your mind anytime.

The loan only needs to be repaid when you sell the house, move out permanently, or pass away. You keep full ownership the whole time. The title stays in your name.

You're not locked into one option

You get approved for a total amount, and then you decide how to use it. Take a lump sum now and set up monthly income later. Keep some aside as a credit line for emergencies. Mix and match however works for you.

How it works

1. You get approved for a total amount

Based on your age, home value, and location, you qualify for a maximum amount, typically 20-55% of your home's value. How you use it is up to you.

2. You decide how to use it

Take it all as a lump sum. Split it between lump sum and monthly payments. Set up a line of credit for emergencies. We'll help you figure out what makes sense.

3. You stay in your home

Keep living in your house as long as you want. You're the owner, not the bank. Nothing changes except your bank account.

4. You repay it later

The loan gets repaid when you sell, move to long-term care, or pass away. Whatever equity is left goes to you or your estate.

What people use it for

Help adult children

Give your kids a down payment for their first home while you can still see them enjoy it. Help with wedding costs, grandkids' education, or just be there when they need a hand.

Travel and experiences

That trip to Europe or Australia is a lot more fun at 70 than 85. Use your equity while you've got the energy to enjoy it.

Home improvements

Install a stairlift, renovate the bathroom for aging in place, or finally redo that kitchen. Make your home work for how you actually live now.

Pay off existing debt

Clear the credit cards, consolidate loans, or pay off your existing mortgage. One less bill every month adds up fast when you're on a fixed income.

Buy a second property

A winter place in Arizona, a cabin at the lake, a condo in Mexico. Split your time without selling your primary home.

Medical or care costs

Dental work, hearing aids, mobility equipment, in-home care. The stuff pensions and government benefits don't quite cover.

How people actually use it

Lump sum + monthly income

Jane and Robert (68 and 70, Vancouver, $850,000 home) qualified for $340,000.

They took $100,000 as a lump sum to help their daughter with a down payment. They set up $1,000/month to supplement their pension. The remaining $150,000 sits as a credit line for future needs.

Realistic numbers, not an actual client.

Lump sum + line of credit

Michael (72, Calgary, $620,000 home) qualified for $250,000.

He took $80,000 as a lump sum to renovate his kitchen and bathroom for aging in place. He kept the remaining $170,000 as a line of credit for medical expenses or future care costs as needed.

Realistic numbers, not an actual client.

The parts people worry about

Interest rates are higher than regular mortgages

Current rates are around 6.5-7.5%, compared to 4-5% for a regular mortgage. The rate is higher because there are no required monthly payments and no income requirements. The bank is taking on more risk, and they price accordingly.

The balance grows if you don't make payments

If you don't make payments, interest compounds. A $100,000 loan at 7.5% becomes about $150,000 after 5 years. That's less equity for you or your estate down the road. A lot of people make interest-only payments to keep the balance flat.

There are setup costs

Expect $3,000-$5,000 in appraisal fees, legal fees, and admin costs. Included in this is independent legal advice (that's required by law). Most people roll these costs into the loan amount.

It reduces your estate

The more you borrow and the longer the loan runs, the less your heirs get. That's the trade-off. Most families we talk to would rather help now while everyone can enjoy it, but it's worth having the conversation with your kids.

Is this the right fit?

Probably a good fit if you:

✓ Need a lump sum for something specific
✓ Want to stay in your home long-term
✓ Own a valuable home but don't have a lot of cashflow
✓ Are 55+ (the older you are, the more you qualify for)
✓ Like the idea of paying on your own terms

Probably not ideal if you:

✗ Plan to sell within 1-2 years
✗ Need ongoing monthly income (look at our monthly income mortgage instead)
✗ Want to leave as much as possible to your heirs
✗ Can qualify for a regular home equity line of credit (better rates)
✗ Aren't comfortable with debt

Find out how much of your home's equity you can access.

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This stuff can be confusing — we're happy to walk you through it. Call us at 250-832-2513

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How we help

We're brokers, which means we work for you, not the bank. We compare rates and terms from all three Canadian reverse mortgage lenders: HomeEquity Bank, Equitable Bank, and Bloom Finance.

We'll tell you honestly if a payment optional mortgage makes sense. Sometimes it doesn't. Sometimes the monthly income option is a better fit. Sometimes you'd be better off with a home equity line of credit. We'll say so.

We help you understand what's available and get the best deal if you decide to go ahead. We've been doing mortgages for 45 years, and we're not going anywhere.

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Compare your options

Payment optional isn't the only way to access your equity. Here's how it stacks up against the other options:

Product	Best for	You get	Payments
Payment Optional	Lump sum needs	One-time payment	Your choice
Monthly Income	Supplementing pension	Regular monthly payments	None required
Home Equity LOC	Ongoing access to funds	Credit line to draw from	Monthly interest

Common questions

Can I pay off the loan early?

It depends on how long you've had the mortgage. Some lenders charge a small prepayment fee. Others charge a large one. Each lender's prepayment terms are different. Figuring out which lender's prepayment options match your specific needs and making a plan around this is a major part of what we do.

What if I want to move?

Again, this is where a broker helps. Some lenders allow you to port your mortgage. Others don't. If you buy another home, you might be able to port the mortgage (that means transfer it to the new property). Or you pay it off when you sell and start fresh. We can walk you through the portability rules.

Can the bank take my house?

No. Canadian reverse mortgages are heavily regulated. You can't be forced out as long as you pay your property taxes, keep your insurance current, and maintain the house in reasonable shape. And even if the loan balance somehow exceeds the home value (very rare), you or your estate are never on the hook for the difference. That's the law.

See all questions about reverse mortgages →

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