Reverse mortgage blog
How Does a CHIP Reverse Mortgage Work in Canada? (2026)
General information for Canadian homeowners, not personal financial, legal, or tax advice.
Key takeaways
- CHIP pays one lump sum; Income Advantage pays scheduled deposits — monthly from $1,000 or quarterly from $3,000; CHIP Max lends the most; CHIP Open can be repaid any time without a charge (HomeEquity Bank).
- CHIP is advertised at up to 55% of the home's value; CHIP Max reaches up to 59%, a ceiling available through the broker channel — where a home lands depends on age, home value, and location (chip.ca).
- Interest is compounded semi-annually, the same as every Canadian mortgage, and it is charged only on money actually advanced — funds not yet taken cost nothing (CHIP rates, dated).
- A CHIP term — six months to five years, fixed or variable — is a rate reset on a for-life mortgage. The early-payout charge follows the original funding date, so a term's end is not a penalty-free exit (HomeEquity Bank posted rates).
- The mortgage becomes due on a sale, a permanent move-out, or the last borrower's passing — the estate then has 180 days to repay, and the amount owed never exceeds the home's fair market value at the time it becomes due, as long as the homeowner obligations are met (what happens when you die).
A CHIP reverse mortgage works as a mortgage with no required monthly mortgage payments: HomeEquity Bank pays off anything still owing on the home, pays you the rest tax-free, and is repaid when you sell, permanently move out, or pass away.
Most homeowners researching CHIP want to understand how it works before talking to anyone — how the money arrives, what it costs to run, and what happens to the home later.
The challenge is that CHIP is not one product. It is a family of four — CHIP, CHIP Max, CHIP Open, and Income Advantage — and HomeEquity Bank explains each one on its own page, in the bank’s own marketing language.
The choice between them is practical. The product decides how the money arrives: one lump sum, or deposits that land monthly or every three months. The term decides how long the rate is locked. Age, home value, and location decide the amount itself.
This page walks through how each CHIP product pays you, the steps between applying and funding, how the interest and terms work, what can be repaid without a charge, and how the mortgage ends.
Whether CHIP is the right lender in the first place is a separate question. The full CHIP reverse mortgage review answers that one — what the rates and fees really are, how the four products compare, and who should skip CHIP.
How does a CHIP reverse mortgage work?
CHIP is a mortgage from HomeEquity Bank, a federally regulated Canadian bank, for homeowners 55 and older. It’s registered against the home like any mortgage. The difference is the direction of the money: no monthly mortgage payments are required — the interest is added to the balance instead.
Anything already owing on the home is paid off first. An existing mortgage or a HELOC (a home equity line of credit) is always cleared and closed from the money at closing. Whatever remains comes to you as tax-free cash — and because it’s a loan, not income, it doesn’t touch Old Age Security or the Guaranteed Income Supplement.
The amount depends on the youngest owner’s age, the home’s value, and its location. The home must be the primary residence and worth at least $250,000, and every owner must be at least 55.
The balance is repaid when the home is sold, when the last borrower permanently moves out, or after the last borrower passes away. Until then, nothing is due.
All of that is true at every Canadian lender — how a reverse mortgage works in Canada covers the category. This page is about HomeEquity Bank’s version: which product pays which way, and on what terms. The independent CHIP review sets CHIP against the other three lenders.
Which CHIP product pays you which way?
HomeEquity Bank sells four products under the CHIP name, and the biggest practical difference between them is how the money reaches you.
- CHIP — one lump sum. The flagship. The money arrives as a single tax-free advance at closing, up to an advertised 55% of the home’s value. Later advances can be scheduled, though HomeEquity Bank’s own fine print says future advances aren’t guaranteed — so the day-one amount deserves real thought.
- CHIP Max — the most money. Built for files that need more than the standard ceiling — up to 59%, a ceiling arranged through mortgage brokers rather than by calling the bank. The trade: a higher rate on every borrowed dollar — and it’s offered in select locations, subject to the bank’s credit rules, with a $300,000 minimum home value.
- CHIP Open — repayable any time. The only version with no charge for paying the whole balance back whenever you like. That freedom is priced in, through a higher rate and set-up cost — built for short timelines, like a sale already planned. It can be converted to the standard CHIP later, for a fee.
- Income Advantage — deposits on a schedule. Starts smaller, then pays regular deposits: monthly from $1,000, or quarterly from $3,000. It’s a mortgage payment running in reverse — the lender pays you — and interest builds only on what’s been deposited so far.
Every percentage above is a ceiling, not a quote: age and location decide where a home lands, and younger borrowers land well below the top number. Each product prices differently too — every current number sits, dated, on the CHIP rates page.
What happens between applying and getting the money?
Six stages sit between the first call and money arriving. None of them are difficult, and a broker moves the file through all of them at no cost to you.
- A free estimate. The starting point: age, home value, and location produce a realistic number — and no credit bureau is pulled for it.
- The application. Light paperwork by bank standards — identification, a property tax bill, a bank statement.
- The appraisal. A full appraisal by a professional appraiser is ordered on almost every file, and it almost always costs about $350. It sets the value everything else is calculated from.
- Approval and the product choice. HomeEquity Bank issues its approval, and the decisions get made: which of the four products, which term, lump sum or scheduled deposits.
- Independent legal advice. Before anything becomes final, you meet privately with your own lawyer — not the bank’s — to confirm you understand what you’re agreeing to. What the meeting involves, and what it costs, has its own page.
- Funding. The lawyer handles the money. Anything owing on the home is paid off first, and the rest lands in your account, tax-free.
How long it all takes depends on the file. The appraisal booking and the legal meeting usually set the pace.
Start with the first step — the number
A free, no-obligation estimate shows what CHIP and the other three lenders would offer on your home — no cost, no credit check, no credit bureau pulled.
Get my free estimateHow does the interest work — and what does a term mean at CHIP?
Interest is calculated the same way as on a traditional Canadian mortgage: compounded semi-annually, the standard across Canadian mortgages. Nothing unusual happens to the math. What changes is where the interest goes — added to the balance instead of paid monthly, so the balance grows over the years.
Only the money you’ve taken costs anything
Interest builds on what’s actually been advanced, never on the approval. Money approved but not taken costs nothing.
That’s why Income Advantage compounds the slowest of the four — most of its money hasn’t arrived yet. And it’s why taking less than the maximum on day one is often the wiser move.
A term locks the price, not the mortgage
CHIP terms run from six months to five years, fixed or variable. Choosing one sets how long the rate holds — nothing more.
A reverse mortgage is a for-life product: when a term ends, the balance rolls into a new term at HomeEquity Bank’s posted rate of the day. There’s no penalty-free exit at a term’s end, because the early-payout charge follows the date the money was first advanced — and fixed and variable sit on the same schedule. The posted reset numbers, term by term, are tracked on the CHIP rates page.
The calculator below is independent — it compares all four lenders, so it shows the whole market’s ceiling at each age, up to 60% for the oldest borrowers. That sits above CHIP’s advertised 55% and CHIP Max’s 59% — and the gap is the point: a comparison finds out which lender’s ceiling applies to your home. Enter the home’s value, the youngest owner’s age, and the amount you’d like:
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. Real numbers depend on the lender, product, rate, and home — which is what a free estimate works out. The full tool walkthrough — including what no calculator can tell you — lives on the CHIP calculator page.
What can you repay without a charge?
Nothing has to be repaid while you live in the home — that’s the product. But CHIP allows two kinds of optional payments if you want to slow the compounding down.
- Regular interest payments. Arranged with the lender, these hold the balance exactly where it started: pay the month’s interest, and nothing gets added.
- A partial prepayment each year. CHIP allows one within its limits, with no charge.
Paying off the whole mortgage early does carry a charge, and its pattern is worth knowing. It starts as a percentage of the amount repaid, highest in the first years. It steps down as the mortgage ages, becomes a smaller charge of about three months’ interest, and eventually falls away altogether. It’s waived entirely on death, and reduced on a move into long-term care.
The dollar figure depends on the year and the balance — paying off a reverse mortgage early walks the charges year by year. And the costs sit beside everything else worth weighing: the case against CHIP lays out the other side plainly.
Free Guide:The Canadian Reverse Mortgage Guide
- ✓How much tax-free cash you could unlock — and what moves the number
- ✓The real costs, rates, and fees — nothing buried in fine print
- ✓How the lenders (CHIP, Equitable Bank, Home Trust, Bloom) really compare
- ✓When a reverse mortgage is the wrong choice
Simply enter your info below and a PDF copy will instantly be sent right to your inbox.
What happens when the mortgage ends?
A CHIP mortgage becomes due in three situations: the home is sold, the last borrower permanently moves out, or the last borrower passes away. After a move into long-term care or a retirement residence, CHIP allows a 12-month window.
On a sale, the balance is repaid from the sale money, and every remaining dollar is yours. After a death, the estate has 180 days to repay — usually by selling the home — and any early-payout charge is waived.
Underneath everything sits the No Negative Equity Guarantee: you or your estate never owe more than the home’s fair market value at the time the mortgage becomes due, as long as the homeowner obligations are met. Those obligations are the ordinary ones — property taxes paid, home insurance in place, the home kept in reasonable repair and lived in as the primary residence.
What those months actually look like for a family — the timeline, the paperwork, the choices — is covered in what happens to a reverse mortgage when you die and in the guide written for heirs.
Is a reverse mortgage the right move — and if so, which CHIP?
The first question isn’t which CHIP product. It’s whether a reverse mortgage is the right tool at all — sometimes savings, a traditional mortgage, or a HELOC is the better answer, and an independent broker arranges those too.
If the answer is yes, two decisions remain, and both are pricing decisions. The first is whether CHIP beats the other three lenders for your file — the four aren’t interchangeable on amounts, rates, exit terms, or how the money reaches you. Bloom, for one, can pay through a prepaid Mastercard drawn a little at a time. The second is which CHIP product fits, because Max reprices every borrowed dollar, Open charges for its freedom, and Income Advantage compounds slowest. And whether CHIP is the right lender at all is the independent review’s question.
Running that comparison is a broker’s job, and it’s free to the homeowner — the lender pays the broker. A free estimate puts CHIP’s real numbers beside the other three lenders:
See which CHIP — or which lender — fits your file
A free, no-obligation estimate compares every reverse mortgage lender in Canada for your age and home — the amount, the rate, and the exit terms, side by side. No cost, no credit check.
Get my free estimateFrequently asked questions
How does a CHIP reverse mortgage work in Canada?
A CHIP reverse mortgage is a loan from HomeEquity Bank for homeowners 55 and older, registered against the home like any mortgage. It pays off anything still owing on the home, then pays the rest to the homeowner as tax-free cash — as a lump sum or as scheduled deposits. No monthly mortgage payments are required; interest is added to the balance instead. The mortgage is repaid when the home is sold, when the last borrower permanently moves out, or after the last borrower passes away.
How does Income Advantage pay you?
Income Advantage starts with a smaller initial advance, then pays regular tax-free deposits on a schedule the homeowner chooses — monthly deposits starting at $1,000, or quarterly deposits starting at $3,000. Interest builds only on the money actually deposited so far, which makes it the slowest-compounding way to use a reverse mortgage. It is built for topping up monthly retirement income rather than for one large goal.
Do you make payments on a CHIP reverse mortgage?
None are required, ever. Payments are optional: CHIP permits regular interest payments arranged with the lender, which hold the balance where it started, and a partial prepayment each year within its limits, with no charge. Property taxes, home insurance, and reasonable upkeep remain the homeowner's responsibility, the same as with any mortgage.
How long does CHIP take from application to funding?
It depends on the file, and the stages set the pace: an estimate, the application, a full appraisal on almost every file, HomeEquity Bank's approval and the product choice, a private meeting with your own lawyer for independent legal advice, and funding through that lawyer. The appraisal booking and the legal meeting are usually the scheduling-dependent steps. A broker keeps all of them moving at no cost to the homeowner.
What happens to a CHIP mortgage when you die?
The mortgage becomes due after the last borrower passes away. The estate has 180 days to repay — usually by selling the home — any early-payout charge is waived on death, and every dollar above the balance belongs to the estate. The amount owed never exceeds the home's fair market value at the time the mortgage becomes due, provided the homeowner obligations were met.
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.