A straight answer
Is a reverse mortgage a rip-off? No — but it is expensive money, and sometimes the wrong tool.
A rip-off is a price that isn't disclosed, or isn't earned. A reverse mortgage's price is disclosed in writing before you sign, with your own lawyer walking you through it — and for some people it earns its place. For others, a cheaper tool does the same job, and we will say so. Here is the price, what it buys, and the honest test.
The price, itemised
1. Set-up costs
Legal work (about $1,500–2,500), independent legal advice (about $400–800), and the appraisal — paid out of the advance in most cases, so little comes out of your pocket up front. Any lender charge sits in the same written disclosure. Every figure, from the lenders' own pages →
2. A higher rate
Typically 1.5 to 2.5 percentage points above a 5-year fixed mortgage. Why, and what one point does →
3. Compounding
With nothing paid, the interest is added to the balance and charged interest itself. On the illustration below, $300,000 is about $568,751 owed after ten years. The catch, in full →
What $300,000 costs if you never pay a dollar
Illustration: a $900,000 home, a $300,000 advance at age 70, 6.5% interest compounding twice a year, no payments made, and the home rising 3% a year. Not a quote — change any of it in the calculator.
- Year 5 · age 75
- Owed
- $413,068
- Home
- $1,043,347
- Family keeps
- $630,278
- Year 10 · age 80
- Owed
- $568,751
- Home
- $1,209,525
- Family keeps
- $640,773
- Year 15 · age 85
- Owed
- $783,111
- Home
- $1,402,171
- Family keeps
- $619,060
- Year 20 · age 90
- Owed
- $1,078,260
- Home
- $1,625,500
- Family keeps
- $547,240
- Year 25 · age 95
- Owed
- $1,484,651
- Home
- $1,884,400
- Family keeps
- $399,749
You are allowed to cap it. Pay the interest each month — about $1,603 here — and the balance stays at $300,000 for as long as you keep paying. Most lenders allow it, and you can stop again whenever you like.
What the price buys
- No monthly payment. For a household whose income is a pension, that is the whole point — not a feature.
- No income test and no stress test. Approval is your age, the home and its location. Nobody asks you to prove you could carry a payment you are not making.
- You can never owe more than the house is worth. The no-negative-equity guarantee — the lender carries that risk, not your estate.
- You stay in your home, as its owner. The obligations are the ones you already have: taxes, insurance, living there.
- The money is tax-free. It is loan proceeds, not income, so it is not taxed and generally does not affect income-tested benefits the way investment withdrawals can. For your specific benefits and estate plan, we encourage a conversation with your accountant, and we are happy to join it.
The honest test: expensive compared with what?
A price only means something next to the alternative. So we price the alternative, every file — and all six options are compared side by side here:
- Against a credit line you qualify for comfortably — usually the reverse mortgage loses, and we say so. A credit line prices lower but demands a monthly payment and full income qualifying with the stress test. Run the comparison →
- Against selling — downsizing frees the most money at zero interest, and costs you the home, the neighbourhood and the move itself. Worth pricing honestly, commission and land transfer tax included. Price the move →
- Against doing nothing — which has a price too: a mortgage payment that no longer fits, repairs that wait, or a family member who needed help this year rather than in ten. Only you can weigh that one, and it belongs in the comparison.
On the illustration above, the family's share of the home after fifteen years is $619,060 against a home worth $1,402,171. That is the trade in one line: the $300,000 now, against the difference then.
When we tell people not to
- Your income qualifies for a credit line and the payment is comfortable — usually cheaper, and we say so
- You plan to sell or move within a couple of years — the set-up costs never earn their keep
- The need is small and short-term — a smaller tool fits better
- Preserving every dollar of the estate is the top priority — compounding works against that goal
More on when it fits and when it doesn't: Is a reverse mortgage right for me?
Asked about the price
Are the set-up costs higher than a normal mortgage's?
There is one item a normal mortgage usually doesn't have: independent legal advice (about $400–800), your own lawyer confirming you understand the product, which is standard on reverse files. The rest is familiar — legal work (about $1,500–2,500) and the appraisal. All of it is paid out of the advance and disclosed in writing before you sign.
Why is the rate higher than a regular mortgage?
Because of what the product gives up asking for. There are no monthly payments, so the lender is paid at the end rather than along the way; there is no income test; and the lender carries the guarantee that you can never owe more than the home is worth. Typically that prices 1.5 to 2.5 percentage points above a 5-year fixed.
Do I still own my home?
Yes. You stay on title as the owner — nothing about ownership changes. Your ongoing obligations are the ones you already have: keep the property taxes and home insurance current, and keep the home as your residence.
Is there any obligation in asking?
None. We model your scenario, compare it against the alternatives you might qualify for instead, and give you a written recommendation. If the right answer is a credit line, a refinance, downsizing, or doing nothing, that is what the recommendation says.
Figures on this page are illustrations at the stated assumptions — reviewed September 2026 — and depend on age, property, location and product. Your exact numbers come from the lender, in writing.
The other questions people ask before they call
What's the catch? →
Compounding — shown year by year, with what softens it and when it outweighs the benefit.
Are the rates too high? →
Why the rate is higher, what one point does over 25 years, and the lever that matters more.
What does it cost? →
Every item, from the lenders' own published figures — and the one that is hard to defend.
Want the price worked out for your own situation?
Bring your numbers — or just the questions. We model your scenario, compare every alternative you might qualify for, and put a written recommendation in front of you. If a cheaper tool wins, the recommendation says so.
In a hurry? Answer eight quick questions and see your typical range on screen — about 90 seconds, no obligation.
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