More Cash, Higher Cost: HomeEquity Bank's New Reverse Mortgage Versus the Traditional One
Picture two Edmonton homeowners, both 62, both in paid-off houses worth $500,000. One takes a standard reverse mortgage. The other takes HomeEquity Bank's new CHIP Max, which lets you borrow a larger share of your home's value in exchange for a higher interest rate. Ten years later, the gap between their balances is far bigger than the gap in what they borrowed.
That gap is what you're really deciding on. A reverse mortgage lets Canadians 55 and older borrow against their home with no monthly payments. You keep ownership, and the loan is repaid when you sell, move out or pass away. Because nothing gets paid along the way, the interest rate does most of the work over time. So the useful question about any higher-limit product is simple: what does each extra dollar of room cost by the time you'd need your equity for something else?
Put both options on the same house
Here's a clearly illustrative example. The rates are round numbers chosen to show the mechanics, not quotes. Reverse mortgage rates usually run 2% to 3% above a regular 5-year fixed, and the Max product sits higher again.
Standard product: borrow $150,000 at 7%. Standard products typically allow up to 55% of appraised value, so this fits well inside the limit.
Higher-limit product: borrow $200,000 at 8.5%.
To keep the math easy, interest compounds once a year in this example, with no payments.
After 10 years, the $150,000 grows to about $295,000 ($150,000 × 1.07 for 10 years). The $200,000 grows to about $452,000 ($200,000 × 1.085 for 10 years).
The second homeowner got $50,000 more up front. Ten years later, they owe roughly $157,000 more. The higher rate doesn't stop at the extra $50,000. It applies to every dollar, and it compounds every year. On a $500,000 house, that difference decides whether there's meaningful equity left.
Count the effort and the later years too
Both products come with the same paperwork. In Alberta, that means independent legal advice, so a lawyer confirms you understand the debt. You'll also pay for a specialized appraisal, and setup costs run higher than on a regular mortgage. Either way, you still cover property taxes, insurance and upkeep.
Both carry a No Negative Equity Guarantee. You'll never owe more than your home's fair market value when it sells. That protects you and your estate from a bill, but it doesn't protect the equity itself. If you borrow heavily at 55 and need assisted living at 80, the money from selling may be thinner than you expected.
The benefits are the same on both sides too. You qualify mainly on age, home value and location instead of income or credit. The money is a loan, so it isn't taxable income and doesn't reduce Old Age Security or the Guaranteed Income Supplement. A larger limit gives you more of those benefits, nothing different.
The condition that decides it
Start with the size of your actual cash gap. Maybe it's a renovation so you can stay in your neighbourhood, help with a child's down payment, or income until CPP and OAS begin. Then check whether the standard product covers it.
If it does, the higher-limit product charges you a higher rate on all of your borrowing for room you won't use. In the example above, that's six figures of equity over a decade.
If your gap is truly bigger than the standard limit, the higher-limit product may be the only reverse mortgage that covers it. Then the fair comparison is against selling and downsizing, and the higher rate is the price of staying put. Work out the number you need, then let that number choose the product.
Picture two Edmonton homeowners, both 62, both in paid-off houses worth $500,000. One takes a standard reverse mortgage. The other takes HomeEquity Bank's new CHIP Max, which lets you borrow a larger share of your home's value in exchange for a higher interest rate. Ten years later, the gap between their balances is far bigger than the gap in what they borrowed.
That gap is what you're really deciding on. A reverse mortgage lets Canadians 55 and older borrow against their home with no monthly payments. You keep ownership, and the loan is repaid when you sell, move out or pass away. Because nothing gets paid along the way, the interest rate does most of the work over time. So the useful question about any higher-limit product is simple: what does each extra dollar of room cost by the time you'd need your equity for something else?
Put both options on the same house
Here's a clearly illustrative example. The rates are round numbers chosen to show the mechanics, not quotes. Reverse mortgage rates usually run 2% to 3% above a regular 5-year fixed, and the Max product sits higher again.
To keep the math easy, interest compounds once a year in this example, with no payments.
After 10 years, the $150,000 grows to about $295,000 ($150,000 × 1.07 for 10 years). The $200,000 grows to about $452,000 ($200,000 × 1.085 for 10 years).
The second homeowner got $50,000 more up front. Ten years later, they owe roughly $157,000 more. The higher rate doesn't stop at the extra $50,000. It applies to every dollar, and it compounds every year. On a $500,000 house, that difference decides whether there's meaningful equity left.
Count the effort and the later years too
Both products come with the same paperwork. In Alberta, that means independent legal advice, so a lawyer confirms you understand the debt. You'll also pay for a specialized appraisal, and setup costs run higher than on a regular mortgage. Either way, you still cover property taxes, insurance and upkeep.
Both carry a No Negative Equity Guarantee. You'll never owe more than your home's fair market value when it sells. That protects you and your estate from a bill, but it doesn't protect the equity itself. If you borrow heavily at 55 and need assisted living at 80, the money from selling may be thinner than you expected.
The benefits are the same on both sides too. You qualify mainly on age, home value and location instead of income or credit. The money is a loan, so it isn't taxable income and doesn't reduce Old Age Security or the Guaranteed Income Supplement. A larger limit gives you more of those benefits, nothing different.
The condition that decides it
Start with the size of your actual cash gap. Maybe it's a renovation so you can stay in your neighbourhood, help with a child's down payment, or income until CPP and OAS begin. Then check whether the standard product covers it.
If it does, the higher-limit product charges you a higher rate on all of your borrowing for room you won't use. In the example above, that's six figures of equity over a decade.
If your gap is truly bigger than the standard limit, the higher-limit product may be the only reverse mortgage that covers it. Then the fair comparison is against selling and downsizing, and the higher rate is the price of staying put. Work out the number you need, then let that number choose the product.
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