Reverse mortgage blog
What Is the Downside of a CHIP Reverse Mortgage? (2026)
General information for Canadian homeowners, not personal financial, legal, or tax advice. Rates and lender details verified as of July 20, 2026.
Key takeaways
- Most listed CHIP downsides belong to reverse mortgages generally, not to HomeEquity Bank — the balance growing, the higher rate, and the set-up costs apply at all four Canadian lenders (reverse mortgage pros and cons).
- Interest is added to the balance instead of paid monthly, so what is owed grows every year — yet borrowers in the only audited Canadian pool still held more than half their home's value, at an average loan-to-value of 45.2% (DBRS Morningstar).
- Reverse mortgage rates run roughly 2 to 2.5 points above the best regular 5-year fixed mortgages (The Globe and Mail) — the price of years with no required monthly mortgage payments.
- CHIP's advertised 5-year fixed rate sat at 6.39% in July 2026, the highest of the four Canadian lenders — though the advertised rate is a retail starting point, not what a broker-arranged file lands at (reverse mortgage rates in Canada).
- The No Negative Equity Guarantee means neither you nor your estate ever owes more than the home's fair market value at the time the mortgage becomes due, as long as the homeowner obligations are met (Financial Consumer Agency of Canada).
- CHIP comes from HomeEquity Bank, a Schedule 1 Canadian bank that has offered reverse mortgages since 1986 and was acquired by the Ontario Teachers' Pension Plan in 2022 (Ontario Teachers' Pension Plan).
The downside of a CHIP reverse mortgage is cost and commitment: interest is added to the balance instead of paid monthly, the rate runs about two points higher than a regular mortgage, and leaving early carries a charge.
Most people looking into a CHIP reverse mortgage want the trade-offs laid out before anything gets signed. Often it is an adult son or daughter looking on a parent’s behalf.
The challenge is not finding information about CHIP. It is that most of what is written about it comes from the lender, and a lender’s page only evaluates its own product. It will never say that a competitor fits better, or that nothing does.
The downsides are practical. Interest is added to the balance instead of paid monthly. Setting it up costs money, mainly an appraisal and a lawyer. Leaving in the first years carries a charge. And CHIP’s rate sits at the top of the four Canadian lenders’. Most of those apply to every reverse mortgage. A few belong to CHIP alone.
This page separates the two, then covers what offsets each downside and who should skip CHIP.
Downsides are one half of the picture. This page is that half in full — the CHIP reverse mortgage review weighs them against what CHIP does well and reaches a verdict on the lender.
What is the downside of a CHIP reverse mortgage?
The downsides are the ones that come with borrowing against a home and making no monthly mortgage payments on it. Here they are in full.
- The balance grows. Interest is added to what you owe instead of being paid each month, so the amount owed rises every year.
- The rate is higher than a regular mortgage. About two to two and a half points higher.
- Setting it up costs real money. An appraisal, your own lawyer for the required independent legal advice, and the lender’s set-up fee.
- Leaving early costs the most in the first years. The charge is highest at the start and steps down as the mortgage ages.
- The amount depends on age, home value, and location. A homeowner in their late fifties is offered far less than one in their eighties, and a strong urban market is lent against more generously than a thin rural one.
- It’s the wrong tool for a short stay that needs nothing in the meantime. If a sale is already close and no money is needed before it, the set-up costs and the early-exit charge buy nothing. A planned move a couple of years out is different — that can still fit, as long as the mortgage is set up for that timeline from the start.
Most of that list isn’t about CHIP
Almost every item above describes reverse mortgages as a category, not HomeEquity Bank’s version of one. A few go away by choosing a different lender. Most don’t go away at all.
Which downsides come with any reverse mortgage — not just CHIP?
These apply at all four Canadian lenders. The full pros and cons of a reverse mortgage in Canada works through each with numbers.
The balance grows — but the equity doesn’t automatically shrink
Interest is compounded semi-annually, calculated exactly the same way as on a traditional Canadian mortgage. The only difference is where it goes: it’s added to the balance instead of paid monthly, so the balance grows.
What that does to the equity is the part people get wrong. Two numbers move at once — the balance climbs, and the home’s value usually climbs too. Rating agency DBRS Morningstar audits part of Canada’s largest reverse mortgage portfolio, and it put the pool’s average loan-to-value at 45.2% as of May 2023, after years of compounding on every loan in it. The average borrower still held more than half the home’s value.
In a flat market nothing offsets the interest, and the equity does fall. Borrowing what you need rather than the maximum is the best protection against that. Which outcome your own numbers point to depends on the amount borrowed, the rate, and the years:
Here's What Happens to Your Equity
Adjust the sliders below to see how your equity can change over time.
Need more than this estimate?In some situations we can structure additional financing to unlock more of your equity — contact us to see if it fits your situation.
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Your 15-Year Forecast
In 15 years, your home is projected to be worth $1,935,282 (at 4.5% growth). Even with the growing loan balance, you would still have$1,288,355in remaining equity!
*Disclaimer: These projections are for illustration purposes only and should not be considered financial advice. Projections assume 4.5% annual appreciation and 6.44% interest rate. Actual results may vary based on market conditions and individual circumstances.
Your 15-Year Forecast
In 15 years, your home is projected to be worth $1,935,282 (at 4.5% growth). Even with the growing loan balance, you would still have$1,288,355in remaining equity!
This calculator is for illustration only — enter a home value, the youngest borrower’s age, and the amount you have in mind, and it projects the balance against the home’s value over time. Your real numbers depend on the lender, the rate, and the property, which is what a free estimate works out. For the CHIP-focused walkthrough of the same tool, see the CHIP reverse mortgage calculator.
What it actually costs to set up
Three one-time costs show up on every file, at every lender.
An appraisal by a professional appraiser is ordered on almost every reverse mortgage, wherever the home is, and it usually costs about $350. Independent legal advice — a private meeting with your own lawyer, required before anything becomes final — is billed by that lawyer, not the lender, and runs $800 to $1,200 in Ontario. Then there is the lender’s own set-up fee.
Nearly all of it can be paid out of the mortgage rather than out of savings. That doesn’t make the cost disappear. It moves it onto the balance.
Why the rate runs about two points higher
The lender is paid entirely differently here, and much later. No payment can be demanded for as long as you live in the home, repayment may be decades away, and the No Negative Equity Guarantee means the lender carries the worst case. All of that gets priced in — reverse mortgage rates in Canada shows where the four lenders currently sit.
The end of a term is a rate reset, not an exit
This one surprises people who know traditional mortgages well. A reverse mortgage runs for life, in terms of one to five years, and a term ending simply resets the rate for a new term. There is no penalty-free window to move to another lender, because the early-repayment charge is keyed to the day the mortgage first funded, not to the term. Fixed-rate and variable-rate terms sit on the same charge schedule.
So the rate you renew at over the years matters more to the total cost than the rate you start at. How reverse mortgage renewals work covers what to do as each reset approaches.
What downsides are specific to CHIP?
Three things are genuinely CHIP’s own. All three are published facts, and all three have context that changes how they read.
Its advertised rate is the highest of the four
As of July 2026, CHIP’s advertised 5-year fixed rate was 6.39% — the highest of the four Canadian lenders, which sat between 6.23% and 6.39% after all four cut within weeks of each other. CHIP’s rates in full has every product’s current numbers, advertised and posted.
That gap is real, and it’s also the least useful number on this page. An advertised rate is a retail starting point. Unpublished specials in the mortgage-broker channel routinely land below it, and set-up fees can often be reduced when lenders want the business.
The starting rate isn’t the whole cost either. The renewal rates over the years, the early-repayment charge, and fees that never appear in an advertisement all move the total more than a fraction of a point at the start does. A lot of what people know from traditional mortgages doesn’t carry over here, and it’s easy to assume it does.
Leaving early costs the most at the beginning
CHIP’s early-repayment charge works the way most of the market does. It starts as a percentage of the amount paid back, highest in the first years. It steps down as the mortgage gets older, then becomes a smaller charge based on about three months’ worth of interest, and after enough years it goes away entirely.
Two protections sit inside that. The charge is waived on death, and it’s reduced on a permanent move into long-term care — cut by half on some products, waived on others.
What it costs depends on when the mortgage is paid off and how big the balance is by then, and the charge on the very same exit differs by thousands from one lender to the next. Paying off a reverse mortgage early works through the timing.
Four products that behave differently
“CHIP” gets used as if it were one product. It’s four: the flagship CHIP Reverse Mortgage, CHIP Max, CHIP Open, and Income Advantage. Each one charges a different rate, lends a different amount, and is built for a different situation. CHIP Open, for example, can be repaid at any time with no charge, in exchange for a much higher rate.
A homeowner who picks the wrong one pays for it for years. Which one a case actually needs is exactly what an independent comparison sorts out, at no cost. The full independent CHIP review breaks all four down product by product.
Find out what your case actually prices at
A free, no-obligation estimate compares every reverse mortgage lender in Canada for your age and home — including the pricing that never appears on a rate page. No cost, no credit check.
Get my free estimateWhat offsets the downsides?
Every downside above has something on the other side of it. Most of these are conditions of the mortgage, not marketing.
- The No Negative Equity Guarantee. Neither you nor your estate ever owes more than the home’s fair market value at the time the mortgage becomes due, as long as the homeowner obligations are met.
- Independent legal advice is required. Before anything becomes final, you sit down privately with your own lawyer, who explains what you’re signing. No lender can skip this step.
- You stay on title. In the way that matters most, a reverse mortgage works like any other mortgage — the home is still yours, and you can sell it whenever you want.
- Payments are optional, not forbidden. Some products let you repay about 10% of the balance a year with no charge, and monthly interest payments can be arranged with the lender, which slows or stops the balance from growing.
- Home appreciation works the other way. The home’s value usually grows over the same years, and that growth applies to the whole home, not just the borrowed part.
The obligations behind the guarantee are the ordinary ones: property taxes paid, valid home insurance, reasonable upkeep, and the home as your primary residence. When the last borrower eventually passes away, the estate settles on a familiar track — the same one as selling a home with a regular mortgage on it.
Is the CHIP reverse mortgage safe?
CHIP comes from HomeEquity Bank, a Schedule 1 Canadian bank regulated by the Office of the Superintendent of Financial Institutions. It has offered reverse mortgages since 1986, longer than anyone else in the country, and it was acquired by the Ontario Teachers’ Pension Plan in 2022.
The documented reverse mortgage frauds in Canada have run through unlicensed people and offers nobody asked for, not through the lenders themselves — reverse mortgage scams in Canada covers those cases and the free checks that protect against them.
Safe and right are two different questions
Safety is about the institution. Fit is about you — your age, your home, your plan, and how long you intend to stay. A sound bank can still be the wrong lender for your home, and the right reverse mortgage for one homeowner is the wrong one for another.
The market numbers say something useful about both:
Every figure above, with its source and how it was derived, sits in the reverse mortgage statistics for Canada hub.
CHIP pros and cons at a glance
Each advantage carries its own trade-off. Read the two columns across, not down.
| Pro | Con |
|---|---|
| No required monthly mortgage payments | Interest is added to the balance instead, so the balance grows |
| Approval is based on age, home value, and location — not on income | The rate runs about two points above a regular mortgage |
| The money is a loan, so it is tax-free and does not affect Old Age Security | One-time set-up costs are real: appraisal, lawyer, lender fee |
| Canada’s oldest and largest reverse mortgage lender, with the widest rural reach | Its advertised base rate was the highest of the four in July 2026 |
| Four products, so the mortgage can be matched to the situation | Four products also means a casual choice costs money for years |
| The No Negative Equity Guarantee caps the worst case | Leaving in the first years carries a charge that only fades as the mortgage ages |
The full picture, product by product with today’s rates and fees, is in the independent CHIP review.
Who should skip CHIP — and who fits?
The fastest way to use everything above is to check it against your own situation.
It’s worth a serious look when:
- Staying in the home for years is genuinely the plan. The costs are front-loaded, so the longer the mortgage runs, the less they matter per year.
- The monthly mortgage payment is the problem. Clearing an existing mortgage and freeing up that payment is the most common reason these get arranged.
- The home is rural or in a smaller market. CHIP lends in more places than the newer lenders do.
- Income is the gap, not a lump sum. Income Advantage pays smaller amounts on a schedule, and you are only charged interest on the money you have actually received.
It’s probably the wrong choice when:
- A sale is already close and nothing is needed in the meantime. The set-up costs and the early-exit charge buy nothing on a mortgage that ends in months.
- A tightened budget could realistically clear the debts. If disciplined payments would genuinely do it, that may be the cheaper path — worth pricing both ways before deciding.
- An income-qualified route is available and you prefer making monthly payments. A traditional mortgage or a HELOC — a home equity line of credit — costs less in interest, and an independent broker arranges those too.
- The money is for something you want rather than something you need. A car or a boat loses value while the balance grows. Just because you can doesn’t mean you should.
What about selling and downsizing instead?
It deserves a look, and it’s not free either. Realtor fees run about 5% of the sale price, plus HST on those fees. Then land transfer tax and closing costs on the next home, legal fees on both ends, and moving costs — an immediate cut to net worth before a dollar of debt clears.
There is also what the move brings: a new street, new neighbours, routines built over decades left behind. Some people want exactly that. Others don’t.
Which path leaves you further ahead is a math question, and whether a reverse mortgage is a good idea at all works through the fit. A broker prices both ways for free.
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How do you decide whether CHIP is right?
Start one step further back than most people do. The first question isn’t which lender. It’s whether a reverse mortgage suits the situation at all, or whether savings, a traditional mortgage, or a HELOC is the better way to pay for what you need.
If the answer is yes, the second question is which of the four. Canada’s reverse mortgage lenders are HomeEquity Bank, Equitable Bank, Home Trust, and Bloom, and they aren’t interchangeable. They differ on rates, on how much each will lend on the same home, on fees that never appear in an advertisement, and on what it costs to get out early. They differ on structure too — Bloom’s lifetime-fixed product is the only one that can move with you to a new home. How the four lenders compare lays those differences out.
That comparison costs the homeowner nothing, because the lender pays the broker after a mortgage closes. What to ask before choosing one is covered in choosing a reverse mortgage broker, and if the product itself is new to you, what is a reverse mortgage in Canada starts from the beginning and how a CHIP reverse mortgage works walks through CHIP’s version, product by product.
Frequently asked questions
What is the catch with a CHIP reverse mortgage?
There is no hidden catch, but there are real trade-offs. Interest is added to the balance instead of being paid monthly, so the amount owed grows every year. The rate is roughly two points higher than a regular mortgage. Setting it up costs money — an appraisal, a lawyer for the required independent legal advice, and the lender's set-up fee. And paying the mortgage off in the first years carries a charge that only fades as the mortgage gets older. Most of that applies to every Canadian reverse mortgage, not just CHIP.
Is the CHIP reverse mortgage safe?
Yes, as an institution. CHIP comes from HomeEquity Bank, a Schedule 1 Canadian bank regulated by the Office of the Superintendent of Financial Institutions, which has offered reverse mortgages since 1986. Every file includes a private meeting with your own lawyer before anything becomes final, and the No Negative Equity Guarantee caps what you or your estate can owe at the home's fair market value at the time the mortgage becomes due, provided the homeowner obligations are met. Whether it is the right choice for your situation is a separate question from whether the bank is sound.
Can you lose your home with a CHIP reverse mortgage?
You stay on title and the home stays yours, the same as with any other mortgage. The obligations are the ordinary ones: keep the property taxes paid, keep valid home insurance, keep the home in reasonable repair, and live in it as your primary residence. A homeowner who meets those is not asked to repay while they are still living there.
What happens to a CHIP reverse mortgage when you die?
The mortgage becomes due, and the estate usually repays it by selling the home — the same track as selling a home with a regular mortgage on it. The estate typically has 180 days to settle, depending on the product, and any early-repayment charge is waived on death. Whatever the home sells for above the balance belongs to the estate.
How does CHIP compare with the other reverse mortgage lenders?
CHIP is the oldest and largest of the four, often lends the most on a given home, and reaches further into rural markets than the newer lenders. Its advertised base rate was the highest of the four in July 2026. Equitable Bank, Bloom, and Home Trust each win on different files depending on age, home value, location, and plan, which is why the four are worth quoting side by side rather than choosing on name recognition.
See what every lender would offer you, not just CHIP
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Get my free estimate About the author
Richard Hopkins
Licensed Mortgage Broker · M16000896
Richard has worked in the mortgage business since 2013 — first as a mortgage agent, today a licensed mortgage broker — and leads the reverse mortgage practice at Homestead Financial — Dominion Lending Centres, an FSRA-licensed Ontario brokerage (#11711) with roots in the industry since 1999 and more than 2,500 mortgages funded. More about Richard →
This article is general information for Canadian homeowners, not personal financial, legal, or tax advice. Everyone's situation is different — please get advice on your own numbers before making a decision. Rates and lender details verified as of July 20, 2026.